TICKY FULLERTON: With the big November 20 G20 talks looming, including a visit from Chinese President Xi Jinping, the pressure is on to wrap up negotiations on the China Free Trade Agreement.

Championing the FTA, Trade and Investment Minister Andrew Robb. He was at the Australian Dairy Farm Investment Forum, speaking this morning and hosing down a report that farmers had to lower their expectations on any tariff deal to match New Zealand. I spoke with the Minister earlier. Andrew Robb thanks for joining me.

ANDREW ROBB: It’s my pleasure, Ticky.

TICKY FULLERTON: Now I think there was a little confusion his morning at the dairy conference about your position over the FTA. You say in your speech today that your major objective with the China FTA is to get at least a New Zealand equivalent deal with the dairy industry.

ANDREW ROBB: That’s correct. That’s what I said to the conference this morning and it is what I have been saying to the leadership of the dairy industry for nearly 12 months – since we took office.

TICKY FULLERTON: So you also spoke though about the need for a broader agenda, because unlike New Zealand, but don’t have all our eggs in one basket.

ANDREW ROBB: Well that’s also correct and I felt that perhaps some people in the industry felt that the whole focus of the agreement was on one sector. And the fact of the matter is that I’ll do my best for all sectors.

We haven’t completed the negotiations yet; and we are at the very tough end; and we haven’t yet made decisions on some of the most important areas such as dairy.

We’ve got a feeling where both parties want to end up, but there’s still a gap between us. So I wanted to alert them to the fact that I’m not certain where it is going to finish up, but if I can, I will finish this thing up this year.

TICKY FULLERTON: Right, because there seems to be quite an imperative though to sign the agreement come the G20 meeting or around then in November. You seem to be negotiating – I think your last session before that time has happened earlier – a couple of weeks ago. So are you going to be able to achieve like the New Zealand deal if you are going to sign a deal come November.

ANDREW ROBB: Well I have been putting it to my Chinese counterparts again since I think October last year; and we’ve had consistent meetings. The other factor is that this negotiation has been going on now for 10 years, and I do think it is time that we brought it to a conclusion. It may – if we don’t finish it – the Chinese might move on to do other things. We can’t assume that they will just persist with trying to reach an agreement.

I think we are at a stage where we can do something which is of enormous value to Australia but it’s not concluded yet. I can’t give definitive answers to anyone in the industry about where we might finish up. I think we will get a good outcome.

TICKY FULLERTON: And, Minister, just what other sectors might be benefitting very strongly from an FTA with China?

ANDREW ROBB: Well a lot of, if not most of the agricultural sectors of course beef and sheep meet and seafoods – a lot of these industries. Some of the industries in agriculture are highly sensitive so again, they’re hard yards for us to make a lot of progress on.

But of course the services area, like the Japan agreement and the Korean agreement – I’m hoping to break a lot of new ground across many services areas. And this is a big part of our future. Our economy is 80 per cent services. We are a knowledge-based economy, and there is so much we can offer.

I think China, as well as benefitting ourselves from services, that could very much contribute right across China on so many fronts.

TICKY FULLERTON: One sector I know was concerned about perhaps rushing this and not having enough of a voice was the Australian Industry Group’s Innes Willox. Do you have any comfort for manufacturers?

ANDREW ROBB: Well, again, after 10 years I find it amusing to be accused of rushing the deal. But secondly, on the manufacturing front, especially on the high-end manufacturing level, I think there will be very material opportunities that open up. It’s very difficult for us as a country to compete any longer in a lot of the general assembly-type manufacturing.

But, you know, I could give you countless examples of high-end manufacturing across so many sectors including health and medical research who are world-leading. I do feel that we’ve sought to put a strong emphasis – if we can – on those areas. And I think there is a lot in it for manufacturing.

TICKY FULLERTON: Minister the other thing you have done this morning – I think – is sign off on a $3 billion Chinese investment initiative. What’s behind that?

ANDREW ROBB: Well I witnessed the signing of an agreement between the very large agricultural cooperative within China; and an independent, foreign investment Chinese company Yuhu who have come together – combined their funds into a $3 billion investment fund. They’ve been in Australia for over two years, exploring the opportunities – getting to know the market, getting to know potential partners in lots of areas.

I think it is a great initiative. It is being conducted in a sensible way rather than running in and looking at making snap decisions on investment which have cost Chinese investment in the past. This is a fund which is of great order – $3 billion dollars – and it will make a significant contribution.

And I think in many ways a model for some other Chinese investment so that they get to know the market and the people and the players and the culture before they put their toe in the water.

TICKY FULLERTON: In agricultural investment, there’s obviously a great deal of potential you’ve talked about in the far-north of Australia. What’s the work being done there?

ANDREW ROBB: Well, it’s not only the north. I mean of course I think across all of the developed areas – if you take Tasmania, there’s enormous opportunities for horticulture and for dairy and other industries.

But in the north, there’s 17 million hectares of what is essentially cattle country at the moment and very broad acre cattle country. But if you add water and 60 per cent of all the water that falls in the north of Australia – we currently capture two per cent of it.

TICKY FULLERTON: I spoke last week to Keith De Lacey who is pushing for a very big – essentially a sugar development – with beef and an abattoir; now he says that is going to be a lot bigger than Cubby [Station]. Is that the sort of thing that could be flicked on for Chinese investment?

ANDREW ROBB: Well I think that is the type of investment – whether it is Chinese or Middle Eastern or American or whatever. I think we’ll have investment interest from across the world, to be honest. And I’ve been out there canvassing such interest. But they will be big projects.

In many ways, people can almost think about them as like another mining project of that order – that size but with a renewable resource that they’re producing. They have to be that size to provide the sort of infrastructure – the power station, the railway line, the port facilities, all of the other logistical facilities; the warehousing which is necessary in the north.

Government is not going to pay for that. If big business comes in – big projects – they will I believe be able to develop the north in a very exciting way to meet the needs of an expanding and emerging market in the region around us.

TICKY FULLERTON: Again there seems to be a great imperative to actually do something and actually get these major projects up to scale, there is also concern from other quarters about sustainability, about biodiversity and indeed about using that amount of water and that a lot of these big projects will be green lit because of the political imperative?

ANDREW ROBB: Well the thing is, as I said 60 per cent of all the water that falls in Australia, falls in the north and we currently capture two per cent of it. If you captured four to five per cent of it, then you could irrigate all across the North, the whole 17 million hectares.

That is not going to happen of course, there will be a mosaic of different ventures and opportunities, so we are not talking about making big inroads into the water that falls in the North, most of is still overwhelmingly 90-95 per cent will still run out to sea and do its environmental work, we are just talking about capturing often with just river diversions and other means, capturing sufficient water on an annual bases to see a good crop grow or feed cattle or whatever.

TICKY FULLERTON: But you do think that there will be the right amount of regulation in place, and you’ve had the joint committee with Warren Entsch looking at it now, there is enough scrutiny going through these big projects?

ANDREW ROBB: Without a doubt, I mean our environmental and water management programs and rules and regulations lead the world, and this will be supervised by both the Queensland, Western Australian governments, with the Northern Territory Government and the Commonwealth, so there will be a supervised restructure, which will continue as always to implement the right sustainable standards.

No-one wants to not lead to a very sustainable outcome. But the point is this can be another source of renewable resources, of food stuffs to feed many parts of Asia, particularly the high-end.

We can capture the high end of all of these areas of agricultural pursuit because of the clean, green, healthy brand and image that we’ve got, which is really gold standard.

TICKY FULLERTON: Minister, you are I think Australia’s first investment Minister, now there are also concerns about the level playing field with overseas, Chinese investors in particular, when there is beginning to be quite some interest from the domestic market in a lot of these agricultural projects.

To give you one example, one of the two Chinese parties behind this latest agreement I think is a state-owned enterprise, backed by Beijing Capital. Now, given that we’ve got more Australian interest, is that going to be a concern?

ANDREW ROBB: Not at all; I think that there is so much opportunity when you look in the region around us, 600 million people currently in the middle class from India to China and every county in between; that is going to explode to something like three billion people from 600 million over the next 20 or 30 years.

The opportunities for Australian agriculture are unbelievable and there is plenty of room for everyone, but also we critically need a lot of foreign investment to help us take the industries to an even higher level, and maintain the innovation, the product development, the transport needs, the distribution needs, the production needs at a level which will enable us to capture their high end value of all these emerging markets.

We have got enough there for every Australian interest and still satisfy a very necessary injection of major foreign investment, as we have relied upon since the First Fleet. 

TICKY FULLERTON: Is there going to be any thought put into concerns into the vertical integration from major foreign investors that could lock up a supply chain, be it from the farm gate all the way through to various logistics and right through to the supermarkets?

ANDREW ROBB: Well look, we still benefit enormously as a country from developments which may involve vertical integration. You take ALCOA for the last 40 years, it has been based out of an overseas country and we have got taxation systems which guarantee that anything leaving, that any aluminium over those 40 years that left Australia got taxed as it went on board the ship. That will happen with agriculture and every other product, all the jobs that are invariably Australian to produce it….

TICKY FULLERTON: So you wouldn’t actually require any co-investment, because once again looking at New Zealand they seem to get a very good deal on tariffs for their dairy, but they have very strict limits about approval processes when it comes to buying land, particularly from state-owned entities.

ANDREW ROBB: We’ve got a threshold level on land of $15 million and on agribusiness of $53 [million], at which level they have to go to the Foreign Investment Review Board, so we have got a provision to look after national interest, but given those thresholds, that Foreign Investment Review Board adjudication, there is still a lot of opportunity and many benefits from accepting foreign investment. It’s been part of our economy from day one and it will always be as long as we have these thin capital markets in Australia.         

TICKY FULLERTON: And Andrew Robb the significant investor visas, they’re obviously being thought about in terms of encouraging investment, individual investment into Australia. Does the Government have a target in mind I was hearing numbers like 1,000?

ANDREW ROBB: We don’t know what the demand would be, but what we are concerned about making sure is that those investments that come in, in order to acquire fast treatment on potential immigration, that that money goes into very productive investment.

So the guidelines have yet to come out but we are looking to make sure that people who do come in under those visas do take some risk in terms of the investment they make, and that it goes into good productive investment.

TICKY FULLERTON: Finally Minister, we’ve got a little piece running on the Australian submarine build, now the reports are that the Japanese option is very much in favour. Could that, if it went ahead, have an impact on the Chinese FTA, given sensitivities?

ANDREW ROBB: Well, I think we are still a fair way away. I think the fact of the matter is that there has been no decision made and all of the options, and there are three of four significant ones, are being very strongly canvased and I think the issue is we’ve got to take a decision which best meets our defence needs. 

The previous administration, the previous government had run down our military spend to the lowest level since 1938 as a proportion to GDP, we’ve increased it again so we’ve got more options and we intend to use that money wisely in the investment we make in the subs and other areas.

TICKY FULLERTON: Andrew Robb it is very good to talk to you. Thank you very much.  

ANDREW ROBB: Thanks very much Ticky.      

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