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Transcript of telephone media conference from Los Angeles re Minister's visit\nto Washington for trade talks and Montreal for the WTO Mini Ministerial Meeting on Doha Round progress.



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E and OE

31 July 2003

Minister for Trade, Mark Vaile

Telephone media conference from Los Angeles re Minister's visit to Washington for trade talks and Montreal for the WTO Mini Ministerial Meeting on Doha Round Progress.

MARK VAILE:

Okay. It’s rather late at night in LA, and we’re all really tired, so I’m not going to talk very long, and I’ll let them ask questions.

The first comment I wanted to make was that the meeting we just concluded this afternoon in Montreal has certainly been a good reality check for all the ministers involved in terms of where we are up to in the Doha Round, and also in terms of what may be achievable out of Cancun, and the longer term prospects of the round, given that we’re about at the mid-point of the designated time that we allocated for the negotiations.

But, look, Montreal offered a glimmer of hope. But there were certainly no silver bullets as far as the discussions that took place, and we now have to embark on a very hard and laborious road between now and Cancun to try and get a good productive outcome in Cancun that will build on the work that’s been done, and hopefully set us up to conclude the round by the end of next year.

If I can just run through some detail, the one thing I suppose is there’s a couple of positives. One was the EU, following their CAP reform, or partial CAP reform and partial decoupling, were able to come along and make some quantitative offers in terms of domestic support, and made some noises about export subsidies, but still not satisfactory noises.

They’ve offered to cut domestic support by 60 per cent. They’re offering to engage in negotiations to reduce export subsidies on the basis that others do parallel cuts with export credits and food aid and the like. And we’ve still seen no commitment from the EU on the Doha agenda as far as phasing out export subsidies with a view to elimination.

But as part of that discussion, what we did do for the first time was to agree absolutely that there is only one key to resolving the whole round, and that is agriculture. And everybody agreed that before we can move ahead with non-ag market access, before we can get to a point of negotiating the four elements of the Singapore issues, or talk about rules, we must have the agriculture pieces of the jigsaw puzzle put in place.

So that has added to momentum and a bit of an imperative to what’s being done, so we spent a lot of time on the three pillars, and reinforced, particularly Australia the Cairns group, and the pro-ag reform group, including the United States, that there were three pillars that were mandated out of Doha to agriculture: market access, domestic support, and export subsidies, where we’re not going to negotiate on one. We’re not going to negotiate on two. It must stand on all three pillars, and we are going to negotiate on all three.

And that message was delivered loud and clear, and by the end of the meeting was broadly accepted. Now, where we’ve got up to as far as the other issues are concerned was that there seems to be fairly broad acceptance that we can agree on a set of modalities for non-ag market access, but it’s still subject to agriculture.

The irony in it is between those two issues, that the countries that are clinging to the life raft of the Uruguay Round formula for market access tariff cuts in agriculture, are the strongest advocates of a harmonisation formula in non-ag market access.

Australia, most of the Cairns Group, and the United States, are arguing for a harmonising formula in both. So in the agriculture negotiations, that’s where the deadlock is at the moment. That the EU, Japan, Korea, and others have taken a very strong position that they want to stick with the Uruguay Round formula of tariff cuts for market access.

Not good enough for us. We made that very clear, in that we actually tabled some economic analysis that has been done by ABARE that proves that that formula will not get trade flowing in agriculture.

And so some then suggested the prospect or possibility of trying to find a hybrid model, in between the two. A blended model of the Uruguay Round formula, and the Swiss formula. Now that work is now going to be undertaken. It’s a part of the process of discussion, particularly, between the US and the EU, between now and the meeting in Geneva on the 11th of August.

There’ll be a lot of hard work going into trying to pursue some commonality in the area that is broadly acceptable, that will deliver genuine trade flows in agriculture.

The other issues that we discussed in our session this morning on the Singapore issues - there are countries such as India which are still holding firm - that they still have a lot of concerns about Singapore issues. As far as Australia is concerned, we don’t have any major concerns in those four areas, other than we want to see the pathway cleared ahead for agriculture, before we agree to start negotiating on new issues.

The other element of the discussions over the last couple of days was with regard to TRIPS and public health. The United States Ambassador Bob Zoellick indicated again that he feels he is making progress in terms of preparing the way so that a text can be put in place and agreed to that will deliver what the developing countries were promised out of Doha. He’s not making absolute

watertight promises, he’s got a lot of heavy lifting to do as far as pharmaceutical companies are concerned, but certainly he indicated that there's been some progress made.

And so as we move towards Cancun, those two issues, TRIPS and public health, and agriculture, - as we flagged at the Sydney meeting in November last year, again in Tokyo in February, Egypt in June, and this meeting in Montreal this month - are the key elements to moving forward.

As I say, we’ve made a little bit of progress insofar as we’ve seen some of the substance that the EU is prepared to put on the table, but still no silver bullets. Happy to answer any questions.

QUESTION:

Mark Davis from The Financial Review, Minister. So can you just elaborate on what the EU did put on the table on agriculture?

MARK VAILE:

Really only the ability to be able to cut domestic support by 60 per cent. Now we haven't seen the structure of how that is to be delivered. Presumably a fair element of that is going to be moving mechanisms - decoupled mechanisms across into the green box. That's what they've put on the table so far.

They stuck to their guns on wanting to use only the Uruguay Round formula on market access issues. There was an indication that there may be a sweetener in terms of the expansion of TRQs and, in terms of export subsidies, they've agreed to continue discussions and the caveat they put on the expression of export subsidies was that they would extend it to particular products to particular countries. But we're going to expect that others, namely the US, deal in parallel with export credits and food aid and there's dialogue going to take place on those issues between now and Cancun.

QUESTION:

Tim Colebatch, Minister. What about state trading boards? Is that still part of the EU's formula?

MARK VAILE:

Yeah, STEs are still getting a mention but, I mean, we're not even seeing enough flavour of the size of a commitment in terms of export subsidies to even, you know, line up to start defending our single desk export organisations, which we are certainly prepared to do. Because if someone's prepared to do the economic analysis on the impact on trade, and any distortion in trade as a result of operations we have going in Australia it will be minuscule compared to the billions of dollars that is directly spent subsidising products into the markets of the world by other countries.

So, in answer to your question, yes, that's part of the parallel request but, you know we are very conscious in terms of arguing the case that what we have in place in Australia is not trade distorting.

QUESTION:

Shane Wright, Minister. There's a few reports that the EU and the US have been fairly close in their talks through Montreal. How great is the fear of another Blair House deal?

MARK VAILE:

Well, it got a fair bit of discussion, strange you should ask, Shane. But, you know, everybody is still very cognoscente of what happened at the end of the Uruguay Round and I think that every intervention had an element or a flavour of commentary that we are not going to let you guys go off and do another Blair House deal.

And of course they're very concerned about that sentiment that's out there, because to get this whole process moving they've got to have bilateral discussions. Because they are the major trade-distorting countries in the world, along with Japan, but Japan has not been prepared to get engaged in a positive way at all so it's being left to the US and the EU.

Now as part of those discussions of course Australia and the Cairns Group is going to be involved in that process, particularly in Geneva.

But if I can give you a very good line - this came from EU Commissioner Fischler at this afternoon's end of the meeting, during the press conference and this shows the level of their concern about attitudes towards the prospect of another Blair House-type deal and the fact that they're going to do everything in their power not to end up in that situation. And he basically said that the EU ministers in their pursuit of an outcome in the round, and particularly as far as agriculture's concerned, wanted a “Full House” and not a Blair House-type agreement.

QUESTION:

Minister, Mark Davis, again. Just on the proposal you mentioned to try and blend the Uruguay Round formula and the Swiss formula. Is that something that Australia and the Cairns Group would support?

MARK VAILE:

Well we've agreed that those discussions should take place. I can't answer that and I can't talk on behalf of the Cairns Group at this stage because we've got to wait and see what comes out the other end of this process to see whether it's acceptable or not.

But the critical test is that what goes into place as far as market access is

concerned must get trade flowing. Now we'll get a copy of some ABARE work that was done, in terms of the Uruguay Round formula applied to agricultural tariffs today across the major supportive countries - that's the US the EU and Japan - and you'll see how it has very little impact on getting trade flowing.

So that's the critical test. We don't know what it's likely to produce. We could stand on opposite street corners between now and the end of the Round arguing about we want the Swiss 25 Formula or we want the Uruguay Round formula and make no forward progress.

At least, if we try this and it doesn't produce anything we've tried it. We won't make a decision on whether it's acceptable - or an outcome is acceptable - until we see the figures and apply it to the model that we've structured as far as what we need.

QUESTION:

Tim Colebatch, again. Two questions: isn't that essentially what Harbinson was doing in his formula? It was a kind of modified Swiss Formula?

MARK VAILE:

Not strictly, Tim, no.

QUESTION:

What's the difference?

MARK VAILE:

What you have to understand is this, that you can imagine how strident Australia and the Cairns Group are on this issue because it's crucial. I mean, this is supposed to be a market access round in both agriculture and product. And the United States is just as strident. At the start of this meeting, you know, were just like the rest of us, couldn't believe that the other countries were arguing one side of the book for agriculture and the other side of the book in terms of the Uruguay Round formula for non-ag market access. But that's just the hallmark of the WTO.

So it's important that we recognise that on this issue that the US still has very high ambitions in terms of getting good quantifiable market access improvements out of this round. Otherwise there's not a lot in it for them.

QUESTION:

The ABARE research you referred to, will that be released to us here in Canberra today?

MARK VAILE:

Yes, we can get it to you. I tabled it in the meeting yesterday. There's two papers that show, firstly the lack of impact that the Uruguay Round formula would have on a major set of products that we're interested in. It also shows how the preferences that the EU provides to developing countries - particularly on products like sugar - where they import about 4.3% of the equivalent of their production of sugar and when they export it I think it's three times that amount, 12% or 13%. So what they're doing is they're buying sugar in from developing countries and LDCs at their intervention price, so their taxpayers are subsidising that. It comes into countries and then they heavily subsidise it back into the world market place to be able to sell it on the world market.

So we'll make sure that you get those two tables and, as I say, I tabled them in this meeting yesterday just to illustrate why we could not accept the Uruguay Round formula on market access.

QUESTION:

Shane Wright, again, Minister. Did you talk to the Japanese representatives about the snap back tariffs on beef and pork while you were there?

MARK VAILE:

Oh, look, in the margins of the meeting. I didn't have a formal bilateral with them. In the margins of the meeting we had, you know, morning teas and lunches and dinners and what have you. But by the time they got to Montreal the deal was done, the Diet passed the legislation it was going into [indistinct].

What I will say that I understand that the Labor Party has been out today criticising the lack of action by the Government on this issue. Well I can give the Labor Party a message that not in the history of their 13 years in office did they advocate as firmly as we did on this issue with our major trading partners to relieve our beef producers of the burden of this tariff.

It should also be remembered that it was the Labor Party in government that signed off on what is a flawed formula. Now you would have seen, possibly today, that the baseline of the formula for the snap back measure is to analyse the immediate previous 12 months imports into Japan and if your imports exceed that by 17 per cent then it triggers the snapback.

But, guess what? For pork the Labor Party agreed to a rolling three year formula which we have always said should've been the case for beef. If we had a rolling three year formula for beef we wouldn't be copping this tariff as we are on beef right now.

Now that was negotiated and signed off on by the Labor Party in government so they are in no position to criticise us in terms of what we've done. Every minister that's visited Japan, right through to the Prime Minister's meeting with Prime Minister Koizumi in the last couple of weeks put maximum pressure on the Japanese not to introduce this. It's an indication of the strength, through their political system, of the farm communities and the beef producers in Japan.

QUESTION:

Minister, Malcolm Cole, at The Courier Mail. How unified is the Cairns Group? How strongly together are you on the issues that you've been talking about, and particularly I guess on the threat to walk away from the whole round if there's no agriculture - there's no acceptable agriculture outcome?

MARK VAILE:

Look, we had a meeting of the Cairns Group ministers that were attending for this meeting two days ago. And I think that there were about nine Cairns Group countries out of the 25 that were there. We had a broad range of discussions.

Obviously we couldn't resolve anything on this particular issue because it was a full Cairns Group meeting. But, you know, the issue arose of what if, when we get to Cancun or we get to a point in the round if what's being offered on agriculture doesn't measure up to our expectations in terms of what we're being asked to pay for it. Now at that point in time I would suggest that there is a prospect that we'd walk away from it.

I can only talk for Australia, and in terms of our position - and I've made this clear to the Americans and Europeans and the Japanese in the course of these ministerial meetings - that this round was built on negotiations on agriculture and services. That's what was delivered up to us out of the Uruguay Round, that was the built-in agenda. [indistinct] and other things.

And if we can't achieve our ambition on an acceptable level of improvement in trade and the global trade of agricultural commodities compared to what we're being asked to pay in other areas we will not agree with it and we will walk away.

I can only speak for Australia at this stage. I'm sure that when we have our full Cairns Group meeting on the 9th of September in Cancun, prior to the WTO ministerial, this issue will be discussed there.

QUESTION:

Tim Colebatch again. On the Peace Clause, precisely when does that expire and would you be prepared to launch action against US and EU farm policies once it expires.

MARK VAILE:

My understanding is that the Peace Clause expires at the end of this year and certainly, as we have always been in the past and we will be in the future, if we believe that one of our exporters or one of our export industries was being unfairly treated in the global market place and we have an opportunity to pursue a particular course of action in the WTO within our rights in the WTO, we're certainly always willing to consider that. And that goes for the, you know, post Peace Clause period just as it does now.

QUESTION:

You could do that during the negotiations?

MARK VAILE:

Well, there are all sorts of actions being taken in Geneva as we speak, as you guys know. Some that we are taking other countries to dispute settlement panels. And there are issues where we are being taken to disputes over [indistinct]. Those actions are taking place during the course of negotiations. And because there's a round of negotiations in train it should not prohibit, limit or restrict any country from exercising its rights under the world trade system.

QUESTION:

Minister, it's Gemma Daley, from Bloomberg … just in respect to your meeting with Rob Zoellick and the discussions over the past two days, are you more confident at the moment of achieving a US trade deal or a WTO agreement?

MARK VAILE:

I can't measure them in the same paddock, Gemma. You know, as I said, after my meetings with Washington last Friday I was still cautiously optimistic, and I've said all along that we've got a better than 50 per cent chance of concluding an FTA but there's still a lot of heavy lifting to be done between now and the end of the year to meet the deadline set by the President and Prime Minister Howard.

But certainly, in terms of getting into the core issues, that's where we are now. The next stage of that process is we'll be going back with a series of requests of the United States in terms of market access by the end of August. I'll have a further meeting with Bob Zoellick in the margins of the ministerial in Cancun in September and the next scheduled round of negotiations between the two teams is in October. But I'm optimistic that we are going to conclude this successfully by the end of this year so therefore there's no doubt that the FTA will be concluded before the WTO round.

QUESTION:

Are you optimistic that the Doha Round will be concluded by the end of 2004?

MARK VAILE:

I'm optimistic that we will conclude a round that will deliver an acceptable outcome. I don't know - I have to be very honest with you - I don't know whether that can be achieved by the end of next year. I think that after the Cancun meeting we'll obviously have a much better idea on that. I'm not prepared to forecast that at this stage.

But even then, I mean, if we come away from Cancun with, you know, a little bit more than what we've achieved now but not a lot, as you know this organisation is a crisis-driven decision making body and, as I've always said, that we'll be working very hard to achieve an acceptable outcome in the round, right through until midnight on the 31st of December, 2004.

QUESTION:

Matt Wade, from The Sydney Morning Herald. The end of the year is not far away, I wonder when it will be that you'll be able to tell the Australian community some of the costs and benefits that will - in clear terms - of the Free Trade Agreement?

MARK VAILE:

With the United States?

QUESTION:

Yes.

MARK VAILE:

We've had some economic work done but I mean it's forecasting on models, obviously. But certainly what will need to happen is that once we've concluded the agreement and that's been made public, then the economic modellers I suppose can have a look at the entire deal and try and forecast the impact and benefits of the deal.

But I would suggest that the best analogy or forecast on that is once it's in action and you see the business and trade start flowing.

QUESTION:

Were you surprised that the US put forward such a disappointing offer?

MARK VAILE:

No. This is a negotiation. It's like a game of - at least a game of poker if not a game of bridge. It's not a game of snap and grab. You know, it's strategic, it's tactical. We went in with a particular tactic and the American side are engaged in this negotiation in the normal framework that they do.

QUESTION:

But have we shown our cards all too early?

MARK VAILE:

No. We're the demand dealers in this. We went and sought this deal from the Bush Administration - well, I actually started talking to senior people in the Clinton Administration. I met one of them whilst in Washington, that was former Deputy USTR, Richard Fisher, and I first started discussing this at the end of 2000 - or actually the middle of 2000. But we've sought this deal, we've sought to engage in this negotiation. We wanted to - given the short space of time for negotiations - move straight to a very strong position in terms of offers. But those offers we put on the table have a caveat on them and they can be taken off the table at anytime. They are subject to what comes back in return.

And so, you know, we're both playing a tactical game, as you'd expect.

QUESTION:

Minister, Mark Davis, again. Sorry, can I just jump back to what you said about the EU offer? You mentioned that they gave some indication of a sweetener on quotas? Did they give any more detail or mention products, or …?

MARK VAILE:

There's no quantitative substance put to that at all. In the general discussion it was commented upon that it could be an element of a deal. That's all that was said. Because we were talking about export subsidies, we were talking about market access and, you know, there was an indication that that may be a sweetener, I think that was the way it was described. So I think you'll find it's really only that developing countries as well.

QUESTION:

Minister, Julie Doyle here. You talked a bit about Europe and the United States, what they're doing. But are we seeing nothing at all from Japan, no movement at all?

MARK VAILE:

No.

QUESTION:

What impact is that going to have, then?

MARK VAILE:

Well it has a sobering impact when you sit in a room with 25 ministers and, you know, representing probably 98 per cent of global GDP, and the second largest economy in the world makes very little positive contribution in terms of trying to seek out and find compromise positions. And it is, and can be, a bit discouraging.

QUESTION:

What about China, Mr Vaile? Did Chinese ministers play much of a role in this sort of dialogue?

MARK VAILE:

Minister Lu Fuyuan, who is the New Trade and Economic Minister in the new leadership team in Beijing played a very active and constructive role in these discussions. This is the first like meeting that he has attended. I had a very good bilateral with him and we actually worked very well together during the course of the meeting over two days, and I can tell you Minister Lu is going to be a very active and constructive participant in the balance of this round and also he's going to be a good friend of Australia's.

QUESTION:

And what about the general issue of trade preferences for developing countries?

MARK VAILE:

Yeah, on both agriculture and NAMA which is non-ag market access, trade preferences to developing countries is an issue. There's still no agreement in terms of what the likely impact is, if any. But certainly it's recognised, both in the discussions we had in Montreal that something needs to be done and we need to be prepared for adjustment assistance in that regard.

The other thing I did whilst in Washington I met with Horst Koehler who is the CEO of the IMF and also the Senior Vice President of the World Bank on this issue, lobbying them to engage with the WTO to participate in programs of assistance and adjustment if there is a detrimental impact on economies of developing countries from preference erosion. But these preferences are purely arbitrary, they can be removed at any time. They're not locked in bilateral deals. You ask some countries that have had them. As soon as they start becoming competitive in the market place those preferences are removed.

But it's an issue that is certainly - was put on the agenda in both those areas and there's sort of a broad disposition that the organisation as a whole needs to work with the international finance institutions to ensure there's a mechanism of safeguard or a safety net mechanism in place.

ENDS