CNBC, Street Signs Asia

ORIEL MORRISON: Australia's TradeMinister is right now in Beijing to talk about the future of the TPP or analternative. Steven Ciobo is leading a delegation of CEOs and holding talkswith senior Chinese officials. He's joining us now live from Beijing. MinisterSteven Ciobo, great to have you with us today. Thank you so much for joining ushere on Street Signs. Now, I know you've only just arrived in Beijing, but youwere just about to embark on a round of talks. Let me ask you if you believethat China could be a viable alternative to the US when it comes from the TPP,given, of course, we know that the US is not planning, at this stage anyway, injoining the TPP anymore.

STEVEN CIOBO: Well I think it'svery unlikely that China would join the TPP. Of course, that option is open toChina to do so, but more than likely out of the remaining countries, the other11 countries that are in the TPP, there's conversations that will happen in duecourse around what the future of the TPP might look like without the UnitedStates, and in fact whether or not there's enough consensus there for us tocontinue on with the agreement. I certainly think there's a lot of value withit, as do a number of my trade counterparts from the other 11 countries, butwe'll look at that in due course.

ORIEL MORRISON: Do you think thatthere's a chance that the TPP could go ahead realistically, because obviouslyin order for it to go ahead, it needs either the US, which now we know itdoesn't have, or Japan?

STEVEN CIOBO: Under the strictformulation of the TPP as it currently sits now, it requires both the US andJapan to ratify it. Now, clearly the United Sates is not going to do that, sothat means under the very strict interpretation of the TPP, it won't come intoeffect as it is, but there's every opportunity for the other 11 countries tocome together, to talk about our desire to hold onto the gains that werenegotiated over a long period of time and that are encapsulated within that TPPagreement, and to look at some small adjustments to the TPP agreement, so thatit can come into effect even without the United States. Now, whether or notthere's a broad enough consensus to do that, I think time will tell.Australia's certainly very keen to see us hold onto those gains from the TPP,but to do that requires us to form a new agreement with however many countriesit might be. I've had conversations with New Zealand, with Canada, with Mexico,with Japan, Singapore, Malaysia and Chile, so there is a strong base casethere, but we've just got to see how things play out.

DAVID KUO: Mr Ciobo, I havemy own personal views about the TPP and they're not really aligned withprobably your views of the TPP, but what I want to know is, what is to stop thecountries from actually talking to each other in the first place? Why do wehave to have a blueprint that all the countries will have to follow? What iswrong with Malaysia talking with Singapore, Malaysia talking with Australia,Singapore talking with Australia, and actually sort of having bilateral tradedeals? Why do we need all the countries to agree?

STEVEN CIOBO: Well the reasonthat typically people advance a multilateral or a plurilateral trade deal overa bilateral trade deal, is because you get a consistency of application ofrules. So the big drawback with bilaterals is that you end up having 20bilaterals, or in this case if all 12 countries were involved, 12 differentbilaterals, and typically each agreement has its own nuances and requirementsin terms of certificate of origins and all those different types of things, soyou end up with what's commonly referred to a noodle bowl of agreements, whichmakes it difficult, especially for small to medium sized exporters to be ableto comply with all the different rules. One of the big advantages of a plurilateraldeal, or effectively a regional trading block like this is that you get onecommon set of rules that apply across the board, and that's particularlyadvantageous to those small to medium-sized exporters who then know that theycan have ease of transactions, ease of exports, trade facilitation with thosecountries, under one common set of rules, which makes it much morestraightforward.

MARTIN SOONG: Minister, this isMartin. Let me quickly jump in with a last question. Can you just give us anupdate. Australia's status, where do you stand with regards to China's RCEPright now, and when you compare RCEP to, let's say, TPP, the US was touting itas a 21st Century trade agreement, the gold standard, et cetera. If,in fact, Australia becomes part of RCEP, would that be second best?

STEVEN CIOBO: Well we are anegotiating party to RCEP. Australians certainly feel that there's a lot ofvalue to RCEP - that is the Regional Comprehensive Economic Partnership. Ofcourse, you've got all the ASEAN countries, plus six more including China,India, and Australia as well as New Zealand, and we think there's a lot ofmerit in RCEP. From Australia's perspective, we would like there to be a higherlevel of ambition in terms of RCEP, so a greater predisposition towardsliberalisation around goods trade, services trade, and investment. We're goingto maintain that position when it comes to the negotiations, and we're activelyengaged in negotiations in a bona fide way for what we hope as a good outcome.Given that you've especially got large population centres like China and Indiainvolved, there's a lot of benefits that can flow from RCEP.

MARTIN SOONG: Minister, though,trying to be more ambitious, to elevate RCEP, wouldn't that necessarily make ita harder deal to close, and if there was one positive for RCEP versus TPP, itwas that generally speaking, it was a lower level, a lower quality agreement ordeal and it would therefore be easier to do?

STEVEN CIOBO: Well, this is thedilemma that every trade minister has all around the world, and that is how youmarry off the need to be pragmatic in securing a deal versus the need to have ahigher level of ambition that can push boundaries and secure bigger gains.Ultimately, it's a judgement call about where on that spectrum you finaliseyour position. From Australia's perspective, though, we would like to achieve anegotiated outcome that is highly ambitious on the good services and investmentfront. Now other parties that are involved in RCEP negotiations don't share ourlevel of ambition, so we'll just have to see where the pragmatic middle groundis. Certainly we want an agreement. We can see the benefits that flow fromRCEP, but we think it's best to maximise those benefits by having as ambitiousan agreement as we possibly can.

ORIEL MORRISON: Steven, look,Donald Trump's now been running the US for a few weeks. Tell me, how do you seethe Australian relationship with the US panning out? Obviously there was thatphone call with Prime Minister Malcolm Turnbull and, of course, the followingmedia storm that followed that. How do you see the overall trade relationshipplaying out?

STEVEN CIOBO: Australia'srelationship with the US continues to be really strong. We obviously have many,many decades as strong allies. It's a very important trading partner forAustralia, it's an important source of and destination for investment betweenour two countries. I have no doubt under the Trump Administration we willcontinue to see a very strong and productive engagement as well as a predispositionon both sides to fertile trade. We actually run a trade deficit with the UnitedStates, because we import things like Boeing aircraft and Caterpillarequipment. But we need those items, those capital-intensive items, in order toactually boost our exports. I mean, every Caterpillar piece of equipment we buyhelps generate the resources sales that we export. Every Boeing aircraft thatwe import into Australia is, of course, an aircraft that we then use to boostour services tourism export industry. We've got a good relationship and I wantto make sure that it continues to strengthen.

ORIEL MORRISON: Okay, alright.Look, we do appreciate your time. Thank you so much, Minister, for enjoying ushere on Street Signs today.