HAMISH MACDONALD: Steve Ciobo, good morning.

STEVEN CIOBO: Good morning. How are you?

HAMISH MACDONALD: Very well. Thank you. The China relationship is being buffeted by a whole range of issues right now, from foreign interference laws, a potential ban on Huawei, Chinese military build up in the South China Seas. What can you say and do to fix this relationship?

STEVEN CIOBO: Well I think inbuilt in your question is the assertion that the relationship is broken, which clearly is not the case. If you look at our trade investment relationship with China it's a very broad and deep relationship. It's a relationship that's going from strength to strength and we see it across a range of products. Now, that's not to say that there aren't occasions where Australia and China have different points of view, but we approach those different points of views mindful of each other’s sovereignty, respectful of each other’s different positions, and Australia's been consistent in terms of putting our view clearly, and I think that that ultimately means that we will continue, both of us, China and Australia, to be invested in a more prosperous, stable, and peaceful region.

HAMISH MACDONALD: The National President of this Australia China Business Council though, John Brumby, is going to use his speech to say that the relationship needs reset and repair to return to a position of mutual trust, respect, and friendship. It doesn't sound like the business community thinks this relationship is functioning in the way that it should.

STEVEN CIOBO: Well, look, that's not my assessment, frankly. I respect that John can have that view but that certainly is not my assessment. Someone who, I think has made something like 12 or 13 trips to China over the past couple of years, I find that the welcome, the reception we get in China is positive. Now, as I said, I'm not going to pretend that there aren't some differences, but broadly speaking, in terms of the relationship, it's very strong.

HAMISH MACDONALD: How can you say the reception is positive when you were the first Australian minister to visit this year and your request to meet your Chinese counterpart was declined?

STEVEN CIOBO: Well, no, let's characterise it accurately. I was in China in September, October last year, together with the Treasurer, for the Strategic Economic Dialogue. I went again only a matter a month or so ago. I didn't go to Beijing I went to Shanghai, where I met with the Mayor of Shanghai. Now in our system, a mayor has a different connotation to the Chinese system, where the mayor is a much more senior person in terms of the Chinese bureaucracy. And I'll be going again this November, when I lead a large number of Australian businesses to the China International Import Expo.

HAMISH MACDONALD: Did you ask to meet your counterpart during that most recent trip?

STEVEN CIOBO: If or not, I looked for an opportunity if I was going to Beijing, to say would our diaries align, and unfortunately they didn't. But nonetheless, you cannot simply wave your hand away and dismiss the fact that I had the chance to meet with, as I said, a very senior, the second most senior person in the Shanghai region. Now, you know-

HAMISH MACDONALD: It must be disappointing though as Trade Minister that you can't get a meeting with your counterpart in China, given, as you say-

STEVEN CIOBO: You making an assertion doesn't make it a fact-

HAMISH MACDONALD: well, you just told me that you did inquire if whether it was possible and it wasn't.

STEVEN CIOBO: I said, look, I don't frankly see a lot of value in this back and forth between you and I about this. You've asked me to characterise the nature of the relationship with China, I've done that. On any measure, on any measure, if you look at the relationship, in terms of the volume of trade, the value of trade, the engagement that we have, we saw the Foreign Minister, meeting with her counterpart Wang Yi, that was a very cordial and warm discussion as well. You know, so I appreciate you wanna characterise it as being broken, to use your words, you wanna characterize it as being a poor relationship, that is not my characterisation.

HAMISH MACDONALD: We've been told by some Australian mining companies, right in the middle of billion dollar contract negotiations with Chinese steel mill—smelters, that they're worried those contracts won’t be signed. They say the viability of their businesses depends on common sense diplomacy prevailing. Do you have a vision of how our diplomatic relationship with China could work in a better way than it is right now?

STEVEN CIOBO: Well I believe that what's important is that we maintain open and regular dialogue. The fact, as I said, that I've had the chance to visit multiple times, the fact that we engage in the number of different international fora, including for example, Julie's meeting with her counterpart, no doubt the Prime Minister will meet with the President at the various G20 and other meetings that take place. So there are regular opportunities for discussion, I think that's important. I truly believe that regular discussion to iron out where there are differences of view, and to reinforce where there are mutually beneficial outcomes from a consistent approach in relation to different issues, is good for Australia, good for China, and good for the region.

HAMISH MACDONALD: Julie Bishop has given a pretty frank interview to Fairfax, she said that the Government is concerned about China's spending spree throughout the Pacific, which could leave, in her words, small islands states trapped into unsustainable debt outcomes, which would be detrimental to their long-term sovereignty. Do you share those concerns?

STEVEN CIOBO: My view in relation to the South Pacific, and I had the opportunity, in a previous portfolio, to have direct, you know, oversight of Australia's relationship in the Pacific, so I have a reasonably good understanding of it. When you move throughout the South Pacific and you have the chance to visit a number of these island nations, is to understand that for many of them they face really significant challenges about development, economic development, and economic sustainability. Many are very small economies, and so they're looking for a partner in their development, someone who will ensure that they can, basically, reach their maximum potential, in a sustainable way. That's the point the Foreign Minister was making, that is at the core of Australia's aid program with respect to the South Pacific, and we see ourselves, and continue to put out, that we are a natural partner for all of these countries in the South Pacific.

HAMISH MACDONALD: So you do have concerns about the sustainability of the Chinese debt arrangement?

STEVEN CIOBO: Well, look, ultimately questions around sustainability are questions for those nations themselves. They're the ones that need to make determinations about the best financing approach for new infrastructure in their countries, they're able to assess whether or not they can repay debts or loans that are made for the financing of infrastructure. We make the point that, as Australia, we want to ensure that they are able to develop new infrastructure in a sustainable way, and that's where Australia sees itself, as a natural partner for these islands.

HAMISH MACDONALD: I want to ask you about the broader global trade environment. Donald Trump appears to be pretty hell bent on some kind of trade war or something akin to it with China, the US has slapped 25 per cent tariffs on $50 billion worth of Chinese goods, Beijing's now responded in kind. If this escalates, the impacts obviously will be felt here in Australia. Is your government modelling the economic consequences of a trade war type scenario?

STEVEN CIOBO: Well, I can't speak to what other Government departments are doing, you best direct that question to the Treasurer because he might be familiar with what the Treasury is up to, but in terms of the Department of Foreign Affairs and Trade, we're always looking at the permutations and combinations of what might transpire. Now clearly, and I've made this point previously, the escalation of tariffs, retaliatory tariffs, none of this is good for global growth. Ideally, we would see these countries resolve these disputes in the WTO. Let's never forget that all a tariff does is transfer wealth from the community to the government. It's effectively a big tax on whatever the good is that's coming into that country. So, ultimately, there will be no winners from increasing tariff wars around the world, whether it's the US and Mexico, the US and Canada, the US and China, or the US and Europe. The consumers ultimately are the ones who of course have to pay the extra levies.

HAMISH MACDONALD: Do you see a bit of commentary suggesting that Australia might actually benefit from this trade dispute if, for example, China decided to take on more agricultural exports from us, in your view is that possible, given all of the analysis that suggests a massive financial hit and job losses in Australia if there were a trade war?

STEVEN CIOBO: Well I mean, this is it, it is possible, that we would see a stimulatory impact in China, which of course would flow across to Australia. We've witnessed that previously, we saw it during the GFC. Ultimately, it goes to the core of some of the faults, and I'd use that phrase, fault, of modelling. Because, ultimately, all modelling is, is a best guess based on certain assumptions, and if you change the assumptions then obviously you can get a radically different outcome. Now with respect to anything that may happen between China and the United States, you make a series of assumptions, you say, okay, well if the USA did X then China would possibly do Y and what's the impact of Y? Now that goes to why I'm loathe to put too much stock or faith in terms of so called modelling in relation to this. What matters more comprehensively is remaining alert to what's happening, and then responding in a way that ensures that you can maximise the opportunity, or mitigate the risk, in relation to any particular activity that happens.

HAMISH MACDONALD: You've been meeting with European Trade Commissioner Cecilia Malmström to formally launch negotiations for a free trade agreement. Given the troubled waters with China, the complexity of that relationship, obviously the possibility of a trade war between Beijing and Washington, do we have any other option but to pursue better trade arrangements with Europe?

STEVEN CIOBO: Well, Europe is a very significant market, our second largest trading partner, it's worth roughly A$23 trillion. It's a critical market for Australia, and it's one where, frankly, we've needed to revisit our trade relationship for a matter of decades. We have the chance now, but this is another part of the puzzle, that the Coalition is rolling out with respect to our most ambitious and comprehensive trade agenda that the nation's ever faced. You know, we have either underway or have settled now, free trade agreements with our top ten trading partners, we've got trade negotiations underway with the EU, in time, with the UK, once they exit the EU, negotiations underway with Indonesia, with Hong Kong, of course, we recently concluded the TPP-11, we did Singapore, Peru, and you know, the Asian trifecta.

HAMISH MACDONALD: But just on the Europeans, agriculture, obviously, is going to be the sticking point, it almost always is when it comes to them doing free trade deals. Will this agreement be worth the paper it's written on if the Europeans don't agree to remove pretty stiff tariffs on a whole range of products from beef to sheep meat, sugar, cheese, and rice?

STEVEN CIOBO: Well, I've indicated that we must have better access to the European market on agriculture. You know, frankly, if we don't achieve that then it's not a good trade deal. So the key to a good trade deal, and again I've made this point repeatedly because I think it's a really important point to make, is that these aren't about wins, and losses, this is about producing a win-win outcome. Now, Australia wants better agricultural access into Europe because frankly, we don't have it, and in fact, with the nation, of a population of 25 million, we import more agriculture products from Europe, than they do with 500 million from Australia. So that really speaks to the imbalance in the relationship. But you know, it's much more than just agriculture though. The big opportunities in relation to services, in particular financial, education, services, big opportunities to driving further investment between the European Union and Australia. These are the big shifts in the relationship that if we actually are able to maximise that opportunity, it'll drive economic growth and drive jobs and ultimately, this is about driving jobs for Australians.

HAMISH MACDONALD: Let's get serious though, about the agriculture question. How are you going to convince the Europeans to do that? I mean, given that imbalance that you've just described, given the power that nation states have within Europe to influence these negotiations, and beyond that, the regional governments, which often hold up these whole processes because they want to hang on to those tariffs.

STEVEN CIOBO: Well, our approach in relation to this is to focus on, this gets technical, but to focus on the core competency of the European Commission, and by that what I mean is that we will negotiate with the EU, so that it is only in relation to those areas that the EU has control over. Which goes to the second part of your question about some of the regional governments and whether they can impact on it. But, ultimately, look, it comes back to this, a trade deal produces a win-win outcome. Australia is a significant market in its own right, we're also a critical staging point for an Asia growth strategy, and that's you know, an area of particular interest for a number of European businesses. So that's what we can offer, in terms of our negotiations and discussions. But we'll engage with the Europeans to, as I said, build on a range of areas, not just agricultural, and I truly believe that we'll be able to include a high quality deal, we do this, and I do this as Trade Minister, on a regular basis with countries all around the world, and this will be no different.

HAMISH MACDONALD:  Steve Ciobo, thank you.

STEVEN CIOBO: Good to speak to you.

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