PETER VAN ONSELEN: Congratulations obviously on the deal, but can I start by asking you, I guess, about the difference between the policy outcome of the deal and the potential political backlash attached to it. And I'd like to site, if you like, dare I say it, Alan Jones, a pretty close ally of the Prime Minister. He pointed out to him, in a radio interview, whilst, well from my extrapolation, whilst there is prosperity attached to the free trade agreement, it's not popular in the electorate, and there's not a mandate for it. My question is, how do you get over that kind of populist sentiment to sell what you've achieved?
ANDREW ROBB: Well, there's two things. One, we have to – as a team in the Federal Parliament – make sure that we do explain to the Australian people that there are enormous opportunities, substantial opportunities; that businesses will get major access to the Chinese market, and the other markets that we've opened up over the last 12 months. That there are jobs, and that there are opportunities for high-end manufacturing, for education, for anything to do with health services, water management, design, and you name it. There are dozens and dozens of major strengths in our country that have just been given the opportunity to access 1.2 billion people, new customers that are going to come into the marketplace for us, so we've got to do that.
But the second thing is that, Asia is in the middle of or at the start of an economic miracle. That's what's going on in Asia, and these free trade agreements give us the bridges into that economic miracle and I do think that put together, the Korean and the Japanese and the Chinese free trade agreements, together with the prospective Indian free trade agreement, really does represent the biggest transformational initiatives in public policy since the floating of the dollar over 30 years ago.
PETER VAN ONSELEN: Now minister, we know there's a significant net gain from the FTA with China, but I want to ask you, have you, and have the Government focused on the potential negatives, in terms of job losses in various sectors as a result of the entry of Chinese goods, the entry of more Chinese goods into this country, and what is your assessment then of the potential damage on the jobs-front?
ANDREW ROBB: Well if you look at it, already, Australia imports around $50b worth of goods from China. A lot of it are electronics, white goods, clothing, shoes, all of these sorts of things that Australia is no longer competitive in. And what it will mean is two things really, one that our consumers will get a much wider range of cheaper goods in this very area because all of our tariffs will go over time. But secondly, a lot of our manufacturing, especially the high-end manufacturing where we're starting to become enormously competitive, medical devices, high-end manufacturing in aerospace and other issues. Now what will happen is that when we reduce the tariffs here, Chinese inputs into those high-end manufacturing are going to become cheaper, so in many respects, we are going to get significant access, even amongst all of the industries that traditionally it’s been difficult to be competitive in. High-end textiles for that matter, they will import some of the fabrics, but turn them into very high value, high design, quality products which will command a premium back in China itself.
So I wouldn't make the assumption that we're going to see significant job losses. Quite the opposite. The opportunities that are going to open up for Australia are phenomenal, absolutely phenomenal and the big thing that the Government's got to do is ensure that our businesses are ready and able, and have got access. It's really why these reforms are necessary; to get us highly competitive and to live within our means. Have taxation reform, reduce marginal tax rates, reduce corporate tax rates. We've got to get major changes and flexibilities into the labour market so more women can come into the workforce. We need encouragement for innovation so that we've got the leading edge. This is a transformational opportunity for Australia. It can set us up for the most spectacular 10, 20, 30 years or more, from this point in time, if we take advantage of it.
PETER VAN ONSELEN: Okay, so what you're really arguing is that this FTA will promote very significant structural change within manufacturing itself, that will see a move to high-end manufacturing as a result of this.
ANDREW ROBB: Without a doubt, and a lot of it will be because the Chinese in this agreement are removing so many of their tariffs that would otherwise penalise high-end manufacturing. We are a skilled, knowledge-based economy. It is recognised by China. The second structural change is that at the moment 80 per cent of our GDP, or nearly 80 per cent is services, 15 per cent of our exports are services. This needs to change dramatically. These combinations of free trade agreements, not just into China but Japan and Korea and then into India, all of these will provide enormous opportunities. Look at China now. I hear what you say about Alan Jones, he said you can't buy farms here, but he said you can't buy anything in China. But this has changed. The free trade agreement, we are having an impact. You can go in once this agreement is struck and set up 100 aged-care homes, with 100 per cent ownership. Private hospitals, restaurants, hotels, the financial services. We can have companies going in and competing directly with the car insurers. These are opportunities that have never existed, no one else has got them, we have. We've got a really enormous opportunity to get first move advantage in this whole miracle that's going ...
PETER VAN ONSELEN: But on that, to take advantage, as you are saying, to get first move or advantage, from what you said earlier, it sounds like there is a lot of reform that needs to be done now to make the most of this free trade agreement around areas like taxation reform. You talked about changes to the corporate rate, I'm guessing maybe even the GST could even be in the mix here. The point is, in your view, is it right, am I hearing you right, in hearing you say that we need major reform now in major domestic areas to make the most of the deal that's been struck with China?
ANDREW ROBB: My view is, as I said earlier, this is potentially the biggest transformational policy change since the floating of the dollar over 30 years ago. But the one thing that will stop us taking advantage of that is if we don't follow through with the major reform program – live within our means, so that we're not paying a billion dollars a month in interest rates, more flexibility in the labour market so we can get the participation moving up another ten per cent. The taxation reform, to get marginal, to get incentives into the system. The innovation reforms that we need to ensure that start-ups can really be commercialised and capitalised on here, and we can compete effectively in that advanced manufacturing. Honestly, people don't understand the miracle that is going on around us. From India through to China, Japan, and Korea and every country in-between. They are on the move economically, and now with the relationships that the Prime Minister has struck with all of those leaders, I can't tell you how important that has been in assisting me to get some of the things in place that we've done.
PETER VAN ONSELEN: [interrupts] Mr Robb can I ask you...
ANDREW ROBB: [interrupts] We have got the relationships – we are seen as central to so much of what they need.
PETER VAN ONSELEN: Mr Robb, can I ask you about, clearly there's a lot of winners I guess, in this free trade deal, you've outlined that this morning. But one of the local industries that is very unhappy is the local car parts manufacturing sector, the component sector. They say this is a disaster for them. They say the Australian market is going to be flooded with cheap imports from China. What is your response to those manufacturers who really have expressed their unhappiness with this agreement?
ANDREW ROBB: Well, again, I think there's significant opportunities; two months ago I took 20 CEOs of aerospace products and items [to Singapore]. Nearly all of them had come out of the car component industry. They've got great skill sets which they're transposing into aerospace and such items. Now the point about it is, they require base inputs, many of which are more economically produced in China. They come in here now under low tariffs or no tariffs. They say their inputs are cheaper, then they add their value to it, their high knowledge-based advanced technology and will sell it back into China and other countries around the world. These companies, and I just say to these car component manufacturers, we are working with them. It is our job, our responsibility as a Government to help them transform but that's what it means by transformative. We move from what was basically assembly which we were not good at in the car industry, but to high-end manufacturing, both in car components, aerospace, a whole lot of related industries and these deals are going to create the opportunity for lower costs, more competitive position and opportunities into those markets.
PETER VAN ONSELEN: Have you spoken to Ricky Muir about this? Because in terms of moving forward to go beyond the signing of the intent with the Chinese President on this deal, you know, his views on this could end up being quite important.
ANDREW ROBB: Well, I'm very happy to speak to Ricky, but I'll just say to you, the approach on these free trade agreements, it must be bipartisan. We're setting up Australia for the next half century and beyond with these deals and we must have an agreement between the two major parties. Bill Shorten has to establish really what his position is on these issues because while he was in the Chamber gushing to the President of China, he had his minions upstairs in the gallery pushing xenophobic, dog-whistling about elements of the package. Now, this cannot persist; the labour movement changes that I've made are totally consistent with what was in place under Labor, and there was a good reason, because I wanted to make sure we had bipartisan support for these extraordinary opportunities that have now been created. So we don't need Ricky Muir if Bill Shorten will come out and say, fully and frankly and unambiguously that the Labor Party supports this golden opportunity for Australian manufacturing, services, agriculture, resources and energy.
PETER VAN ONSELEN: But minister, he hasn't said that. He hasn't said that. And the ACTU has complained about a lot of the implications of this agreement. What are the consequences if Labor either doesn't come on board, or delays for some time any decision?
ANDREW ROBB: Firstly, I can't believe that Labor will end up in that position. It will be political suicide if they do, but not only that, it will compromise Australia's opportunities to get a first move advantage to get into these markets and to capitalise on the relationships and the structural reforms that have now been offered to us. But secondly I think the cross bencher's, also, they've come into the Parliament to do good things, and this is about as good as it gets.
PETER VAN ONSELEN: Yes Mr Robb, I guess free trade agreements are a red hot political issue for both sides of politics, in the sense that the Labor Party represents a large section of the unionised workforce and they're obviously unhappy with this agreement, they've expressed that. But there's also a small business constituency, I guess, aligned to the Liberal Party, that is not export focused, that is focused on the domestic market, and they will find more competition, we've talked about the car components sector. Are you worried about elements of the Liberal Party's base vote, particularly in rural and regional areas, that aren't focused on export markets, that will feel a pinch with the products they're trying to sell to Australian consumers?
ANDREW ROBB: Well, look, the point is, if you give an enormous boost to our export opportunities, and you get services exports going from 15 per cent of GDP to a much higher figure, you are injecting more money, profits, back into every area of the country. And those, invariably, the domestic focused industries are supplying goods and services, retailing or whatever for the local market. Now if consumers have got cheaper products from overseas, they've got more money to spend. If the businesses, all of the export businesses – and bear in mind we are an export focused economy – if those businesses are doing well and that money flows back to consumers, they then spend it on small businesses that aren't involved in exports. This is the way it works, if we can lift the wealth and the profits and the job opportunities, the tens of thousands of job opportunities that are going to come from this exercise, it will enhance the spending and the wealth and the confidence across the economy. It'll lead to more local investment. It will lead to, again, more income. This is a good news story. This is about setting Australia up to be part of the Asian miracle, not over the next year or two, although it starts now, but over the next 30, 40, 50 years.
PETER VAN ONSELEN: Mr Robb, I wanted to ask you, we were talking before about you know, the possibility, or how Labor might react to ensuring bipartisanship on this particular free trade agreement with China. One of the issues that the former Trade Minister Craig Emerson has written about, and expressed surprise I suppose, that was included in this deal was the investor-state dispute mechanisms. He says that, that was never on the table beforehand. Can you just take us through what they exactly are, and why they've been applied?
ANDREW ROBB: Well, in the case of China, of course, and I'm sure Craig must have been aware of this, but we've had an investor-state dispute settlement mechanism with China since 1988. So 25 years we've had an agreement with them, and the sun still comes up every day. In fact, there has not been one dispute either way between Australia and China, but it does provide a measure of confidence, especially for Australian investors, who now can potentially put in very serious capital into all sorts of ventures in China and own them 100 per cent in their own right. They need to know that there's not going to be discriminatory Government policy in the future which they've got no way of addressing. But the fact is it's been there, and in fact, we have made changes in this agreement where we have carved out areas of health and environmental public policy that won't be subject to this ISDS provision. So we've taken that provision which has been in place for 25 years and made it more acceptable to the Australian public.
PAUL KELLY: Minister, on a broader question, China has proposed a Regional Infrastructure Bank, for a region that's got a growing need for infrastructure of course. From your perspective as Trade and Investment Minister, what do you see as the advantages for Australia joining such a bank?
ANDREW ROBB: Well, on the assumption that the bank is operating on world class governance standards and the Chinese inform me and the Prime Minister and others that that is their intent. If that is the case, this bank will go a significant way to meeting what is about a $750b deficit within a lot of the developing countries in the region. Now, to address that in a substantive and rapid way is a huge need and it will greatly assist all of the countries in the region. But Australia will be a big beneficiary. We won't receive the monies, we'll be a donor, a net donor, but the fact that all of the developing countries in the region get access to enormously important productivity related infrastructure will be a boon to the whole region and accelerate that Asian economic miracle that I talked about.
PETER VAN ONSELEN: Now minister, what's your view about this argument, this proposition that's been accepted that there are security strategic intelligence reasons for us not to join this bank?
ANDREW ROBB: Look, firstly, I do feel, that from my heavy involvement across China over the last 12 months and through some decades of less intense involvement but observation, I think the Chinese have realised that if they are to keep meeting the legitimate expectations of hundreds of millions of their citizens who have yet to benefit from the developments and the miracle taking place in China, that they have to have forms of law enforcement, they have to have institutional arrangements, they have to have governance arrangements, they have to have things that are first world standard, and I think they see it's in their own self-interest to assume a highly responsible and leadership position in the region. And part of that, one small part of that, is this bank for instance. Now if the governance provisions are in place I do not see any issues with any political strategic positioning. I see good things coming out of this, an enhanced reputation for China as a proponent of stable regional development, and the test is the governance provisions, and we've said to them if we get those governance provisions in place, and they've moved a long way already on that I must say, then we'll be there with enthusiasm and we'll be encouraging Japan and the United States to follow suit and join this regional bank.
PAUL KELLY: Okay. I'd just like to ask you then, how confident are you that Prime Minister Tony Abbott will shift his position and move away from the veto on Australian membership of the bank that he has applied for security factors?
ANDREW ROBB: If the governance provisions that we've put to them, which only replicate really what are in place for other similar bodies such as the World Bank and the Asia Development Bank, I am 100 per cent certain that the Prime Minister will sign up.
PAUL KELLY: Well that's a very bold prediction.
ANDREW ROBB: Well it's based on many conversations that I've had with him. He is concerned to make sure that we are party to a fully and properly governed body, but if those provisions are met on transparency and other...
PETER VAN ONSELEN: Do you have that guarantee from the Prime Minister, I mean obviously by the sounds of it you and him must have talked about it.
ANDREW ROBB: Well, you've asked me what chance I would put on the Prime Minister, I'm not going to speak for him, all I'm saying is that my judgement is he will be there signing up if those governance provisions are met, that is the condition we put.
PAUL KELLY: But just on that point minister, I think it's very clear then from what you've just said that you regard the decision by Cabinet's National Security Committee on this issue as a mistake.
ANDREW ROBB: No. No. It's not clear at all, what I'm saying is that if those governance provisions are not met, it does raise a doubt about elements or purposes of such an institution. If those governance provisions are met where you've got full transparency, the bank is not dominated by any particular country, all of these issues that are part of the Asian Development Bank. It will be based in China, it's their initiative, it's a great thing. It can be seen as a Chinese initiative but it needs to operate in a way that reflects all the memberships' desires.
PETER VAN ONSELEN: But minister, those perspectives might be important from a governance perspective but do you really think that they're relevant from a national security perspective, whether they're there or not? They might be a reason not to join for governance reasons, but are they a reason not to join for security, national security?
ANDREW ROBB: Well, they are inextricably linked, very much linked, because if the bank was structured in a way where the membership did not have an opportunity to reflect their priorities and their view on any decision then, you'd have to question: is it going to be used for strategic purposes, rather than to enhance productivity and infrastructure in the region. If the transparency is there, if there is provisions to ensure that every member has got appropriate influence over decisions, that no one country dominates and dictates, then that strategic doubt that might have been in the minds of people, quite legitimately – and we pay our security people to put up these sorts of considerations – we've taken account of them. So we have said if these governance provisions are met then the doubts and the questions raised by our security advisors will be met, and then that way we will sign up and it will be a very positive, constructive, significant contribution to that Asian economic miracle that's underway.
TROY BRAMSTON: Mr Robb the signing of a China free trade agreement does obviously cause a ripple in geopolitics. One of the suggestions has been that because Australia has gained so much access to Chinese markets that there may in fact be a strategic imperative for China in signing this agreement, in that they will be aligning themselves very closely in an economic sense with a social security partner of the United States. Do you think that has been a factor in China's willingness to sign this free trade agreement and to give us so much access to their markets?
ANDREW ROBB: No. I think the principle motivations which I observed, and I needed to understand – if you are going to negotiate these sorts of things you have to understand and put yourself in the shoes of those you're negotiating with. In my sense, they had two major motivations. One was that they did want to send a signal to the developed world that they were ready, willing, and very much able to do an agreement which led to a significant opening up of their economy. To do such an agreement in a way which sent a signal that they can participate as an equal partner in these sorts of agreements around the world, in issues such as the trade and services agreements from which they are excluded at the moment.
The second motivation is that they know that if they don't transform from an industrial rural based industry and economy as they are at the moment, if they don't move on to become a largely services based economy; 52 per cent of their GDP is now services, ours is 80. They need to go much higher because that's where the jobs are. They've got 700 million farmers who are moving into the cities.
TROY BRAMSTON: Just on the security question, there's been a lot of commentary in recent years about Australia's closer security relationship with the United States and a growing one with Japan, and often a suggestion put out by some very senior foreign policy commentators that Australia, the US and Japan are trying to contain China. This free trade agreement I guess has busted through this argument. So looking at it, as you said, from the Chinese perspective, putting yourself in their shoes, surely they must see that as a strategic boon to them by forming such a close economic relationship with an alliance partner of the United States.
ANDREW ROBB: I'd see their motivation again as far more economic. They were looking to see how they could access and open up their services market, albeit with an economy that is not going to be in a position to fully cover the whole economy in China. They wanted to really experiment I think with opening up major areas – their services, their financial services, their engineering services – all the other professional services: the health services, the education services, aged-care services. All of these areas they're looking at how they can capture first world opportunities and skills sets and IP without creating problems, structural problems internally, which they hadn't anticipated. Now to do a deal with us, that's why I have said to them many times: ‘think of us as one of your special economic zones’ and you really are experimenting and seeing what works and what doesn't work, rather than doing a major deal with the United States or Europe, where they might create internal structural problems which they can't manage the transition of.
PAUL KELLY: You are aware, obviously, you heard President Obama's speech in Brisbane. Were you surprised by what the President said about Australia and climate change, and do you believe that the President misjudged what the Abbott Government has done so far in relation to climate change?
ANDREW ROBB: I was surprised, and I felt that the President was not informed about Australia's achievements, which have been bipartisan achievements. We get a lot of people lecturing us from around the world about meeting targets. We've met the Kyoto targets. We, Australia, met the Kyoto targets, under two administrations, both Conservative and Labor. Most of the countries that are lecturing us, did not meet their targets. We have got a track record and we have got a program to meet the 2020 targets, which are roughly comparable to what the US and others have put in place. So I don't think, others should be coming and lecturing us on climate change and the reduction in emissions in the way in which we have heard over many months from many different sources around the world, including the President.
PAUL KELLY: Well there's no doubt that the President did come on Australian soil and did lecture the Australian Government in particular. Do you think this was an inappropriate thing to do, and do you think it showed a lack of respect for the Abbott Government?
ANDREW ROBB: The timing and the content was wrong. We are spending near a quarter of a billion dollars every year, again, both sides of politics have been doing this, to protect our greatest environmental asset, in the Barrier Reef and no, it gave no sense of the first world, high-class efforts that Australia is making successfully to deal with that issue and to maintain that great asset.
So it was misinformed, and it also, I think, was unnecessary, given that the whole focus, or the principle focus, was quite reasonable to raise climate change in the course of the conversations over the weekend but there had been 12-months work gone in to shifting the focus of the G20 to greater growth, sustainable growth, that can eat into high unemployment levels in many parts of the developed world in particular, but also to look at the trade and investment roles that will [indistinct] in that growth.
PETER VAN ONSELEN: Why do you think he did it?
ANDREW ROBB: Look, you'll have to ask others, I've got no idea.
PAUL KELLY: Well, given that you've just said that his comments were wrong, unnecessary and misinformed, do you therefore think that this was the action of someone who had a distinct lack of respect for the Abbott Government?
ANDREW ROBB: Well, look, I don't want to make judgements. We've worked so well and cooperatively on so many issues in the last 12 months with the President and with his administration. So a one off issue like this, I think from what I read in the papers, the whole thing was introduced to him very late in the piece, was a surprise to most people, including all the organisers, and including him I think, that he was expected to make such a speech, so I don't know that it got the due consideration that most major contributions by the President would receive.
PETER VAN ONSELEN: Were you as impressed, or as happy, surprised if you like, as Tony Abbott was at a commitment that he thought that the Chinese President made that there would be a western styled democracy in place in China by 2050. Tony Abbott described it as an ‘historic historic’ statement. Do you agree with that?
ANDREW ROBB: Well, I thought that the Chinese President did quite emphatically state, as he has done before, but to do it in a foreign parliament, to say that he has got the democratic ambition albeit a Chinese view of democracy, in other words [indistinct]...
PETER VAN ONSELEN: [interrupts] In other words not democracy.
ANDREW ROBB: Well their view is that a one party state with a very democratic process of moving up the various hierarchies.
PETER VAN ONSELEN: But that's not what Tony Abbott said. In fairness, Tony Abbott talked about it being a full embrace of democracy and therefore an ‘historic historic’ moment. I'm guessing you may have seen my op-ed yesterday in The Australian but the Chinese President meant absolutely nothing of the sort. It was a complete misunderstanding of his words by Prime Minister Abbott, surely?
ANDREW ROBB: Well I thought the fact that he stood up in the Australian Parliament and very unambiguously declared his ambition to see a strong democratic feature of China in the years ahead, I think was significant, I do. I agree. I was impressed by that part of his contribution.
PETER VAN ONSELEN: Do you think he's moved on, sorry to interrupt, but do you think he's moved on from all the things that he said halfway through this year when he did his four nation tour through Europe and made it quite unequivocally clear that there is no interest on the part of China to embrace a western styled democracy or any of the sort and that western leaders like to misrepresent the interests of China in this area. Do you think he'd had a change of heart from those comments by the time he addressed the Australian Parliament?
ANDREW ROBB: No, look, I'm just saying that he has stated a 30 year ambition, a 35 year ambition to progressively introduce more democratic features into the Chinese economy, he said that. I mean, that's a fact. And to me that was a very significant sign. Now whether they are fully democratic in the sense of western democracies, or whether...but you can in many ways introduce significant democratic features into an economy and to me all of those things are important steps towards an economy which is sustainable, and one which respects human rights and all the rest of it.
TROY BRAMSTON: Mr Robb, just very briefly, the Government this week announced some cuts to [indistinct] in the inner cities, but they might be worried about a number of Coalition MPs who have expressed their concern about budget cuts to the ABC. Now you're a former director of the National Farmers Federation, you know how important the ABC is in rural and regional areas. Do you think they have a right to be concerned about the impact of budget cuts on the ABCs broadcasting outside of the major cities?
ANDREW ROBB: No I don't. I think really the highest priority of the ABC is to maintain the services into regional areas, for all sorts of reasons, but largely because, in many cases, that is the most prominent source of both radio and television information and now the digital contribution will be important, so I think that is a first priority. So in really getting into the cost of, in most cases, back office – if we see lots of cuts to programming into regional areas, we will know that games are being played to try and spook the Government out of keeping the pressure on the ABC to share the sorts of proficiency gains that every other part of the public service is being asked to make. As I said, we started this conversation 20 minutes ago on the Asian economic miracle and our capacity to join that. We won't join that economic miracle if we don't get our own house in order, if we're not competitive, if we're not lean and competitive, and part of that is living within our means, and the public service – including the ABC which has been a protected species for a long time – it has to make its share and its contribution to that process of Australia, and especially Government, living within its means so that we can wind back the debt, stop paying billions of dollars a year in interest for the Government debt, and get ourselves in position to capture the enormous opportunities that the next 30, 40, 50 years offers Australia.
PETER VAN ONSELEN: Andrew Robb, you've been extremely generous with your time, congratulations again on the deal with China. Thanks very much.
ANDREW ROBB: Thanks very much Peter. Thanks gentlemen.
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