Michael Pachi: There’s been a lot of talk about the free trade deals that have been ratified over the past 12 months. Australia has reached agreements with South Korea and Japan, and of course the big one with China which comes into force from today. But how will we benefit from these agreements? Joining us on the line from Kenya is Trade Minister Andrew Robb; Minister thank you very much for your time.
Andrew Robb: It’s my pleasure Michael.
Michael Pachi: We’ll talk about what you’re doing in Kenya in a moment, but first, the China free trade deal is now official; what I think most of our listeners will want to know is how will the average consumer benefit from the deal?
Andrew Robb: There’s a range of tariffs on clothing, toys, electrical goods and appliances that will all be eliminated, so these sorts of items will be cheaper. At the same time, a lot of the tariffs that Australian producers face in agriculture and manufacturing etc., have been removed. That will increase business opportunities here, which will increase jobs and that will give a lot more job security to a lot of your listeners, so it cuts both ways; we get benefits from the cuts both in Australia and the cuts that the Chinese will be making to their tariffs.
Michael Pachi: About 86 per cent of Australian goods and services will have no tariffs attached from today, but tariffs on other goods will gradually be reduced in the years ahead, is that the way this is going to work?
Andrew Robb: That’s correct. When you take off tariffs it does provide a benefit to our consumers, but it also can put some more competitive pressure on our businesses, so in order for them to adjust, it’s phased out over three or four years.
The same thing happens in China; they will phase down their tariffs. Some go off immediately, but others are phased down depending on the sensitivity for local industries.
Natalie Peters: Minister on businesses, how can Australian businesses exploit the deal with China; if you have something you want to export, what doors does this deal open?
Andrew Robb: The range of tariff removals in China is enormous. Let me take some of the agriculture examples: in dairy the elimination of the 15 per cent tariff on infant formula, the progressive elimination of the up to 20 per cent tariffs on ice cream and lactose, and the elimination of the 15 per cent tariff on liquid milk; these are big reductions in the barriers that face our businesses and it makes us more competitive.
No other country has got the benefits that China is giving to Australian businesses in wool, sheep meats, beef and the opportunities in the resources and energy sector. A lot of our manufacturers will face no tariffs going into China. Nowadays we’re doing a lot of high-end manufacturing like medical devices and things which require a lot of expertise; it’s high-value output and we’re going to get markets in China with concessions that no other country has been given.
Michael Pachi: It’s not just about manufacturing and the agricultural sector like the dairy farmers that are going to be doing well out of the China free trade deal, it’s also the export of services; essentially we’re offering our expertise in areas such as education, aged care, even the financial services sector, so that’s another area that’s opened up as well, as a result of these agreements.
Andrew Robb: You’re absolutely right. We’ve got the best services deal that China has given any country. They’ll ultimately I think give these sorts of benefits to others, but we have a first mover advantage, because things like our health services – they really want our expertise and the world class services we’ve got in health and nursing and aged care; any aged care operator will be able to go in and for the first time ever, own 100 per cent of an aged care facility and open as many as they wish.
These are the sorts of concessions China hasn’t given to businesses and countries in the past. They want our education services, as you say our financial services, our water management services, architectural services, engineering services. Australia has got an enormous opportunity to open up whole new growth areas for our services sector right across the economy.
Natalie Peters: Moving on from the China deal, you’re actually calling us from Nairobi, and I understand that you’re there with more than 160 members of the World Trade Organization and a major agricultural deal has been done; what can you tell us about that?
Andrew Robb: The WTO, which involves 161 countries, they’ve been trying to reduce the trade barriers between all of those 161 countries; for 15 years they’ve been singularly unsuccessful in doing that, but last night Kenyan time, we concluded an agreement whereby the export subsidies that have been applied to agriculture for decades in many areas, have all been abolished. They’ve agreed to abolish all agricultural export subsidies – $15 billion worth worldwide. Now this is an issue that’s plagued Australian farmers for decades and decades.
Michael Pachi: As you said it was $15 billion worldwide, how much of those savings will be part of Australia?
Andrew Robb: We have had the right to exercise subsidies if we chose to; we haven’t done that for 15 years. These things can badly affect the price on the world market if one country comes in and spends billions of dollars in giving subsidies, and this has been happening at various times over recent years. It’s spasmodic, with different countries and different products; it can introduce a lot of uncertainty and can seriously undermine the price on the world market, and can keep our farmers out of certain markets.
It’s been a very distorting practice by many countries; North America in the past, the European community as well, and now a lot of the developing world is starting to do it, so the agreement to abolish these subsidies will mean a great deal more certainty for Australian farmers in the years ahead. It will mean far less interference in the price we receive as there won’t be spasmodic reductions and dives in prices, and we’ll be more competitive in many markets, so it all stacks-up as being a historical decision that’s been taken.
Alongside all of the free trade agreements we’ve entered into – with South Korea, Japan and China today, and the Trans Pacific Partnership with 11 other countries – all of these things are setting us up as a country to take full advantage of the extraordinary growth that’s occurring in the region around us.
For the first time, if you like, since the European settlement 200 years ago, we’re starting to see unbelievable growth; the world’s major source of growth is being driven from the region in our backyard, so we need to do these things so we can capture all those opportunities. Australian businesses have got a spectacular 20, 30 years ahead of us if we do take these opportunities.
Michael Pachi: Andrew Robb great stuff, have a great Christmas and we’ll catch you again next year in parliament.
Andrew Robb: Thanks Michael, thanks Natalie.
- Trade Minister's Office: (02) 6277 7420
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