CNBC interview

AKIKO FUJITA: Minister of Trade Investment and Tourism, Steven Ciobo, here with us in Hong Kong. Great to have you on today. You had a talk earlier this week in strong defence of the WTO. Essentially, saying there would be anarchy without the WTO in place. That sounds like a shot that's fired towards Washington.

STEVEN CIOBO: No, no, it's a simple statement of fact. I mean you know, the whole purpose of the international rules-based order is to ensure that small countries and big countries can both coexist and they have a mutually beneficial outcome. If we allow a situation to occur where we don't have an international rules-based order, well then it's the big countries prevailing over the small countries and you know that's not in anybody's interests.

AKIKO FUJITA: There is a sense among some that the WTO is under threat right now, given the rhetoric that's coming out of the White House. Essentially, Washington saying, "We are going to go after these trade deficits regardless of how it is achieved." And there seems to be a question here at investors we've been speaking to, about how far the White House is willing to go on this front. And now there's reports they could go after $60 billion worth of Chinese goods, going after the tech companies, the telcos, intellectual property. How are you viewing this entire dialogue that's going on right now?

STEVEN CIOBO: Well, I understand that each country's going to be motivated to pursue its national interest, that's obvious. And that, obviously, is consistent with the actions that countries will take, but fundamentally, there are some international norms that need to be, in many respects, reinforced. Australia is a strong pro-market, pro-free trade, pro-liberalised trade country. That's why we pursued the TPP-11, that's why we've got one of the most active trade agendas that we've ever pursued, right now. Ultimately, what the United States decides to do is obviously a question for them. My focus, though, is working with all countries to make sure that we can reinforce those structures and those vehicles like the WTO, which are responsible for policing the conduct of countries around the world. In the absence of there being a cop on the beat, so to speak, you're left with a situation where, as I said, the- I mean to use a turn of phrase, "The big fish eat the little fish, and the little fish eat the shrimp." I mean, we don't want that outcome, what we want is an outcome where there's a consistent set of rules that applies globally, that countries comply with.

AKIKO FUJITA: You're talking about working with other countries. What is that conversation right now that's happening among yourself, as well as other trade ministers, in light of potential action coming from the White House? I know Australia has been in close contact with Japan, as well as Canada. That dialogue is happening. What is that discussion?

STEVEN CIOBO: Sure. Well, the dialogue is taking place. All of us are motivated by what we can do to reinforce, as I said, those structures like the WTO. That's not to suggest for one moment the WTO is perfect, it's not. Even Roberto Azevêdo would acknowledge that there are reforms that need to be undertaken to improve the WTO. Australia's signed up to that, even the Europeans will sign up to that. There's work that we need to do to better shape and mold the WTO's functioning. But by the same token, those of us that are engaged in these discussions as, for example, best exemplified by the TPP-11 agreement, which we recently signed. We want to continue to open up opportunities for trade, for investment. The TPP-11 was one example, we've got a strong focus on the Regional Comprehensive Economic Partnership. Just last weekend the Australian Prime Minister, Malcolm Turnbull, hosted a Special Summit with ASEAN member countries. So we're very focused on what we can do to continue productive and constructive discussions about making sure that we overcome some of those challenges on the trade investment front.

AKIKO FUJITA: Australia's one of the countries that did receive an exemption when it comes to the tariffs on steel and aluminium that were recently released from the White House. There's a lot of questions about why Australia was, in fact, exempt. What was that conversation with the White House?

STEVEN CIOBO: I think the exemption with the US references a couple of points. The first is that we have a very open and fair trading system between Australia and United States. I know that fair trade is very important to President Trump you know, and I don't have a problem with fair trade. Australia pursues its national interest. Every country pursues its national interest. It shouldn't be a surprise to anybody that United States will pursue their national interest. Ultimately though, when it comes to the Australia-US bilateral relationship, very broad, very deep, strong investment flows. The US is our biggest source of foreign investment into the country. We've got a strong trade relationship. In fact the US runs a trade surplus with Australia, so when you look at that context, plus the fact that we're allies and we have, of course, decades of standing alongside each other, those are the basis upon which the exemption was sought and provided.

AKIKO FUJITA: The reality is, the US does have strong relationships with Australia, but there are other allies in the region, like South Korea, as well as Japan, who were not exempt from this. Were there any concessions Australia had to make on the security front, perhaps, to try and quiet the concerns coming out of the US to say, "Look, we are willing to make an exemption."

STEVEN CIOBO: Well, I can't speak as to why they did or did not exempt other countries, that's a decision for the US administration. But, certainly from Australia's perspective, this, and let's be very clear about this, this was a discreet outcome. And what I mean by that is there was nothing that was required to be done, or conditions put on the exemption. The exemption is there because of the national security interconnection between Australia and the United States. That's the basis on which the exemption was provided and that's the basis on which we take it forward.

AKIKO FUJITA: We heard from White House advisor, Pete Navarro, last week, talking about how this could be resolved peacefully. How he saw a situation where perhaps those who ran a trade deficit with China could become some type of coalition here. Essentially, working together to put the pressure on China to change the trade rules here. Is that something Australia would agree to?

STEVEN CIOBO: Our trade relationship with China, I mean, it's our most significant trade partner. Australia's relationship with China on trade is a very positive one. We run a surplus with mainland China. You know, and our experience on trade has been very positive with China. China is engaged with Australia. We've got a really liberalising free trade agreement between Australia and China, in terms of a bilateral free trade agreement. So, and even on intellectual property, again our experience as a country with China, I think is fair to say has been different to the US experience on issues like intellectual property. So, you know, we will continue to engage in a really constructive way. I'll be honest as well though, China acknowledges, and have made comments to me at senior Government levels that, take for example, one of the most hotly contested issues, which is the global steel glut. I mean, China has said to me, that they recognise that there is a glut of steel. They're taking reforms and putting systems in place to reduce the amount of output of steel that China's putting into the market. They need to balance that against their own domestic considerations with employment and that's understandable. So, what is most important now is for ongoing dialogue, discussion and understanding about how all of the countries involved can work together in a constructive way, to prevent an outbreak of hostilities, in terms of trade hostilities, which obviously are not in anybody's interests.

AKIKO FUJITA: Finally, you did mention the success of the CPTPP earlier. It does seem like that's just another example of how trade within the region is increasingly- increasingly, we're seeing these countries turning to each other. The US is clearly out of the mix for now, but it does look like, whether it's China and Japan, or Australia and China, these traditional roles where there was a lot more competition. We're seeing a bit more receptiveness to partnership. Do you see the trade in the region accelerating as a result of the broader dialogue that's happening?

STEVEN CIOBO: Sure.

AKIKO FUJITA: In the US context?

STEVEN CIOBO: Look, I think that there's no doubt that there's going to be an acceleration of trade in Asia Pacific, particularly in Asia. That was part of what lay behind Prime Minister Turnbull's initiative with respect to the ASEAN Special Summit. What lay behind our decision to free trade agreements that we've successfully concluded with South Korea, with Japan, with China. I'm now pursuing free trade agreements with Indonesia and with Hong Kong. We have the Regional Comprehensive Economic Partnership Agreement, that's a key priority for Australia as well, and we hope to conclude a high quality deal there. So, all of this is built around recognizing there are global value chains in the region. We are all, in many respects, sitting in this region together. We'll trade off each other. There's a booming middle class in Asia and we think that all of us, having clear rules of the road so to speak on trade, can benefit from each other's integration of our economies integration of supply chains and opportunity will present itself. So in the region, it's a really positive story.

AKIKO FUJITA: Okay. We'll leave it on that positive note. Minister, great to have you on today. Mr. Steven Ciobo.