Interview with CNBC Asia

Singapore, CNBC Studio

Subjects: Trans Pacific Partnership, trade and investment

Transcript, E&OE, proof only

26 February 2014

ANDREW ROBB: It’s nearly four years. If you look at the WTO they have gone 15 years and have only just struck their first agreement and that’s not the gold standard. But, this is complicated. You’ve got 12 countries all of different sizes representing around 40 per cent of the world’s GDP and it is an opportunity to get, really, a 21st century agreement in place, a seamless level of trade relations across 12 regional countries and its quite exciting, the prospect, and I’d be concerned if I didn’t think we were heading in a very constructive way.

I’ve made the comment that I think we are at 80 per cent but we are at the hard part which is the market access. But we have made a lot of progress as to what was going to be put on the table by each country in a market access sense and of course what happens between the Japan and the US is key, because they are the key players.

JOURNALIST: Even before you get to US and Japan, the US itself, one of the biggest problems we have heard about with TPP is the fact they still don’t have fast track for this.

ANDREW ROBB: My observation, and I’ve been to Washington every year for 30 years — so I’ve got a little bit of a feel for the politics there - there is a lot of posturing going on, it’s a mid-term election year. I feel that there is no reason why we can’t continue as 12 countries to negotiate and negotiate this through while they’re sorting out their internal politics. Every country has to ultimately have their agreement approved, so there is nothing unique about the US. Other countries will have issues within their own country to sell the package but I think we’re heading towards something that can materially provide sustainable growth throughout these countries and sustainable jobs.

JOURNALIST: Minister, timeline wise — are you saying that we are going to have to wait until after November mid-terms to get the politics out of the way so the president’s democrats can support fast track?

ANDREW ROBB: Well, I don’t know to that extent. I’m just saying to you if we finish this within the next two or three months, I’m not saying we will, but if we did, to me, you could see a development in the US. But, I think it’s probably going to take us through this year to get to a conclusion and to get all the politics done in all the countries, frankly, but we’re not years away, in my sense, we’re months away.

JOURNALIST: Is the focus on regional and bi-lateral trade agreements, not just TPP but the more bilateral ones, is it merely a reflection of how miserably the WTO has failed to try and achieve a more global deal?

ANDREW ROBB: What I’m discovering around the world is that there is a disillusionment with a lot of the interventionist policies that followed the Global Financial Crisis. It is not delivering sustainable economic growth, enough to get down unemployment and therefore, there is this move to trade and investment and you’re right, they can’t wait for the WTO, I don’t think people are going to desert the WTO because it really sets the global rules, but there is this plethora of Free Trade Agreements.

We have just finished one with South Korea, we are well advanced with one with Japan, but we’ve got this plurilateral with 12 other countries. To me, they are like bricks in a wall, to me it’s not a problem, in fact it does lead to structural change in countries. It’s not a multilateral, it’s not perfect, but over time you’re starting to see a lot of concessions in all of these countries, a lot more structural change, and so, you are sort of leading towards, once you have built the wall, you are at a multilateral result. It is why, as a new government in Australia, we are trying to send a signal and make the structural changes to show that Australia is open for business, trade and investment has become centre stage for us.

JOURNALIST: We’ve been talking about the Chinese RMB. Trying to figure out why on earth it’s been slipping when for so long — everyone figured it’s a one-way bet. What’s going on here, is it the economy is slowing, moderating, so forget this rebalancing thing and consumption — we’ll leave that for later. Right now we need to get exports going again. Is that what’s going on?

ANDREW ROBB: Well, who knows is the first answer. One of my sons is a currency trader and he says “Dad, don’t get in the business of picking what exchange rate and what’s really driving it”. But these things are — it’s a relative business, currencies. I’ve been in the US just in the last fortnight. There’s enormous confidence starting to emerge there. The low energy costs because of all the shale oil and gas has had a very material impact. Manufacturers, you can almost see them walking through customs with machinery under their arms. It’s a fascinating development. And I think the strength of the US is now starting to put some pressure on the RMB. Who knows though, there’s a lot of internal issues in China. The debt issues — they’re a concern, the local debt issues, but as I say, who knows.

JOURNALIST: Now, ok, not a fair question, but have to ask it, we’re obliged. The Aussie dollar as it is now, where it is trading now. Are you comfortable at that level?

ANDREW ROBB: Well it is a lot better than it was at 110 cents to the US dollar. That really put pressure on a lot of our manufacturers. But we are 15 per cent lower than it was. It is starting to give us some return to competitiveness along with some major reductions in regulations that we’ve brought in. We’re getting rid of the mining tax. We’re getting rid of the carbon tax. We’re desperately trying to lower business costs. If the dollar can stay where it is, or a bit lower, we’re really an attractive place to invest.

JOURNALIST: Before we let you go Minister, China has its own trade arrangement — RCEP (Regional Comprehensive Economic Partnership). There’s been a lot of talk as to whether China should be, or even wants to be, part of TPP. From Australia’s point of view, if China were to become part of the TPP, would that be beneficial?

ANDREW ROBB: Absolutely. In time, what we’re looking at with TPP is open architecture which will accommodate increasing numbers of countries coming in. And RCEP, as you mentioned, there’s a similar objective within that. We’re involved there. Ultimately these two could come together and you get a regional free trade zone. To me, that’s the objective. I know already with TPP as I visit other countries that aren’t members, there’s a lot of interest in joining up — a lot of interest. So if we do a really high-quality agreement, there will be countries saying we can’t afford to not be involved in….

JOURNALIST: So this could be unifying as opposed to divisive?

ANDREW ROBB: Absolutely. Absolutely, and already, if China — they’re also asking — tell me more about TPP. They were somewhat antagonistic to start with. I think they’re now coming to see...

JOURNALIST: This is about on the services side, yes?

ANDREW ROBB: Yes, that they need services desperately.

- Ends -

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