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Transcript of press conference: Parliament House, Canberra: 12 August 2004: US Free Trade Agreement; school funding.



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PRIME MINISTER

12 August 2004

TRANSCRIPT OF THE PRIME MINISTER THE HON JOHN HOWARD MP PRESS CONFERENCE, BLUE ROOM, PARLIAMENT HOUSE

Subjects: US Free Trade Agreement; school funding.

E&OE……………………………………………………………………………..

PRIME MINISTER:

Well ladies and gentlemen, we’ve called this news conference in relation to the Free Trade Agreement. Can I start by reiterating that the Free Trade Agreement does not in any way weaken the Pharmaceutical Benefits Scheme. The Free Trade Agreement will not in any way lead to increases in the price of medicines or pharmaceuticals in Australia. The claim by the Labor Party that this would be the case has always been false, I would never and Mr Vaile would never have agreed to the FTA if that had been the case. Why would any Prime Minister of any political stripe in Australia in his right mind agree to something that would weaken the Pharmaceutical Benefits Scheme? And the Labor Party amendments in relation to this have always been both unnecessary and a smokescreen. At least the amendments as put forward by the Labor Party do not impose penalties on failed patent applications and they do represent a shift in the ground that was laid down by Mr Latham last Tuesday week when he announced the Labor Party’s position.

They could however have adverse affects on Australian companies and that has been pointed out to the Labor Party and concerns have been expressed on behalf of Australian companies that these amendments are unnecessary generically, no pun intended, but they’re also unnecessarily heavy handed and they could have a particularly deleterious affect on some start-up tech companies of Australian origin, I mean it’s one of the additional reasons why we think they’re very unnecessary. Our greatest concern over the past few days has been their possible inconsistency with the spirit of the Free Trade Agreement, and this is no empty concern. The Free Trade Agreement has in it a requirement that effectively that the law at the time the agreement is signed should not be altered by the enabling legislation, and Mr Vaile will correct me if I get the technical expression of it wrong, by the enabling legislation of the two parties. In order words if there is any change of substance to the laws then either party reserves the right in relation to the final exchange of notes to object.

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What happens after enabling legislation is passed on both sides, and this applies particularly with the Americans, is that their lawyers have to certify to President Bush that there is no inconsistency and it’s only when that occurs can the American President send a note to me and I send a note back to him, or perhaps it’s done by Mr Zoellick and Mr Vaile, I’m not quite sure, in effect bringing the treaty in operation. And there is a possibility and the Americans have made it very clear that they reserve their right to look at the legislation in its final form before certifying to the President that the Free Trade Agreement has not been breached. There is a possibility that the Americans will find that this legislation is in breach of the provisions of the Free Trade Agreement and if something does occur along those lines then it will be on the Labor Party’s head and nobody else’s head if a difficulty in finally implementing the agreement arises. Now I hope that does not occur, I have communicated these concerns to the Labor Party and we have sought some technical amendments to reduce the possibility that the Americans would conclude to that affect. But they will not accept those amendments, and the Government has decided that the common sense thing to do is to support the amendments but warn as I do that the enabling legislation could be construed by the Americans as inconsistent with the Free Trade Agreement and if that were to occur then it would be entirely the fault of the Labor Party and nobody else’s. Now, I hope that doesn’t occur and obviously we will be if the requirement occurs we’ll be representing the Americans, because it will be in the national interest that we do so, that there is no inconsistency - but we’ll be representing the collective view of the Parliament. But I want the Australian public to understand that these amendments are quite unnecessary, it is purely been a political face saving device in relation to the internal politics for the Labor Party of this issue and if in the final analysis the insertion of the amendments presents a problem well that will be the exclusive fault of the Labor Party, not my fault because we are doing the only commonsense thing and that is despite all of our reservations accepting these amendments because to refuse to accept them would be to deliver to the Labor Party what I believe many of them in that party want and that is a denial of the Free Trade Agreement, but if in the final analysis the acceptance of these amendments does cause a problem it will be the fault of the Labor Party and nobody else because these amendments are unnecessary.

I go back to basics - the Pharmaceutical Benefits Scheme was not weakened by the Free Trade Agreement. No Prime Minister in his right mind would agree to that and I’ve said all along that we would not compromise on the Pharmaceutical Benefits Scheme and it is an entirely manufactured sense of outrage by the Labor Party. The Pharmaceutical Benefits Scheme is as safe as houses under the Free Trade Agreement and if however this unnecessary clumsy amendment which at least is different from what was outlined last Tuesday week and that is its only virtue, if it does cause a problem then the Labor Party will be to blame and nobody else.

JOURNALIST:

Prime Minister, two things - can you pin point where the fear of an inconsistency is?

PRIME MINISTER:

Yes, very easily.

JOURNALIST:

...in the amendment and secondly, has the Americans either formally or informally conveyed to you concerns about the amendments of the Labor Party’s proposal?

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PRIME MINISTER:

Well, I can pin point it very easily and Mark may feel the need to supplement what I say because he’s the expert but the Free Trade Agreement says that there should be no changes and no additional burdens and no changes to the law between the signing of the Agreement and the coming into force of the agreement through the enabling legislation and quite plainly this legislation does change the law and it changes it in a number of areas significantly and unnecessarily.

JOURNALIST:

But how does it materially affect the operation of the Agreement if as you say the Free Trade Agreement doesn’t jeopardise the PBS in anyway?

PRIME MINISTER:

Well, but you can have a change to the law which doesn’t relate to the operation of the PBS. The point I’m making is that the Free Trade Agreement requires that the relevant domestic laws of the two contacting parties should not change between the signing of the agreement and the coming into force of the agreement. Now, what has happened here is that for purely unnecessary reasons other than politics the Labor Party has insisted upon some changes to the laws which the Americans may choose to construe as being in breach of the Agreement simply because it adds a burden that wasn’t there in the first place.

JOURNALIST:

But is it within the realm of possibility that the Americans would abandon the whole deal just because...

PRIME MINISTER:

Alison, I hope not. But they have indicated to us overnight that they reserve their position.

JOURNALIST:

(inaudible)

PRIME MINISTER:

They have indicated, I mean, there are obviously concerns on their part but they are obviously reluctant to take sides given that there is a domestic political debate going on in this country but they have indicated to us that they reserve their position. See what has to happen is that Zoelleck’s legal people have got to certify to the President that the enabling legislation has passed in Australia fully complies with the terms of the Free Trade Agreement and it’s only when that happens that the President then is able to send a note to us or sign off on the thing to say that everything has been completed then I think there’s an exchange of notes between you and Zoelleck or it’s probably me and Bush.

MINISTER VAILE:

It’s between governments, I mean part of the agreement is that around about the end of October there’s an exchange of letters between governments acknowledging acceptance of

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the legislative process enacting what was agreed to in the FTA and that’s going to be the same in the Thai FTA and that is so that both sides can review the enabling legislation that each other enact to ensure that was agreed is exactly being implemented and the point being made here is that the negotiation was undertaken and agreed to on the laws of Australia as they stood then. This amendment changes that.

JOURNALIST:

How was this concern from the Americans conveyed?

PRIME MINISTER:

It was conveyed in Washington by Mr Zoelleck to our Embassy.

JOURNALIST:

What is the specific concern?

PRIME MINISTER:

Well, the concerns are in relation to the changes in the law which they regard and we regard as unnecessary. I mean, it’s self evident, you’ve seen the amendments because they alter the law.

JOURNALIST:

So is it the penalties or the....

PRIME MINISTER:

Well, all of the alterations they impose, if you look at the actual terms of the Free Trade Agreement it speaks of changes which involve I think the imposition of burdens that weren’t there at the time the agreement was signed.

JOURNALIST:

Including on local content?

PRIME MINISTER:

I beg your pardon.

JOURNALIST:

Including on local content?

PRIME MINISTER:

No, no this relates to the Pharmaceutical because the local content, the law hasn’t been changed. It’s just the way the law is expressed has been changed. Now look, the point I make is that it’s ultimately for the Americans after the legislation has been passed to make their assessment. They haven’t said to us this morning that it’s definitely inconsistent. They

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haven’t said that it’s not inconsistent - what they’ve said to us is that they reserve their position to make that determination and we ourselves believe on our own independent assessment that there is a potential for inconsistency because of these unnecessary changes. Now, that is and we thought the commonsense thing was to make some changes to these unnecessary ALP amendments to reduce the possibility that there would be a problem. Now, I’m not telling you that it’s going to fall over, what I am telling you is that there is a possibility of a difficulty because there has been a change in the relevant law. That change does impose burdens that weren’t there before. Those burdens are unnecessary both in our view and in the view of the Americans given that the Free Trade Agreement itself does not undermine the PBS. Now I hope that my fears are completely groundless because there’s nobody in Australia who wants this Free Trade Agreement more than I do because I believe very passionately in it. But I have tried to minimise the possibility and I therefore want it to be fully understood by everybody that if a problem does arise it will be exclusively the fault of the Labor Party.

JOURNALIST:

Mr Howard, in the event that the Americans do scuttle the Agreement as a result of these amendments, won’t the Labor Party be able to argue that in fact that will prove the worth of the amendments and the need for them as safeguards?

PRIME MINISTER:

No I think it will just demonstrate the fact that a lot of people in the Labor Party secretly wanted that to happen.

JOURNALIST:

Can you tell us Mr Howard who started the overnight exchange, did we sound out the Americans?

PRIME MINISTER:

No, we’ve had discussions, I mean there’s been some exchanges, there were exchanges immediately through the American embassy when they saw the amendments.

JOURNALIST:

… or was Australia seeking to see whether these amendments would be acceptable?

PRIME MINISTER:

I think in fact the first response was of their initiative.

JOURNALIST:

How long will we have to wait to find out what the Americans will be…

PRIME MINISTER:

Well I don’t know. Tory, I’m not trying to overstate this but equally you can’t pretend that I’m just exercising, you know, just some kind of pointless rhetorical flight, I’m not. There

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has been a material change to the law, when this goes through it represents a material change to the law and under the terms of the Free Trade Agreement the lawyers have got to certify to President Bush that changes have not imposed burdens that weren’t there at the time the Agreement was entered into. Now clearly there’s a possibility that they will see these changes as being inconsistent with that provision. They may not, or they may decide even through.. even though there is a possible inconsistency then they might possibly deal with it through the dispute resolution procedures of the Agreement. And they may take a number of other factors into account, and obviously if we are approached we’ll be arguing, not withstanding our own reservations here, we’ll be arguing to uphold the law and to suggest that it’s not inconsistent. But the only reason that we have put forward these technical amendments is because of our concerns in this respect.

JOURNALIST:

… necessary?

PRIME MINISTER:

I beg your pardon?

JOURNALIST:

Would you take it to the President if necessary?

PRIME MINISTER:

Well look Michelle let’s wait and see what happens. Clearly I want this Agreement and because I want the Agreement I’m prepared to accept an amendment which is completely unnecessary and potentially risky because the alternative to not accepting it obviously is we certainly then do not have a Free Trade Agreement. Which many people, many people in the Labor Party would be delirious with joy about.

JOURNALIST:

Prime Minister, could I just ask you a question on schools, we had a very bitter debate in Parliament yesterday…

PRIME MINISTER:

Well I’ll be very happy to answer that. But can we just finish on free trade?

JOURNALIST:

Prime Minister, how can you argue to the Americans that these changes are not inconsistent with the spirit of the Free Trade Agreement when you’ve said here today that they potentially are?

PRIME MINISTER:

Well I will as any good prime minister should do accept the decision of the Parliament of Australia and argue as best I can. I am honour bound to defend the laws of Australia.

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JOURNALIST:

But how can you undermine that argument…

PRIME MINISTER:

No, I haven’t, the undermining has been done by the Labor Party.

JOURNALIST:

Mr Howard, (inaudible) you can’t say that and then…

PRIME MINISTER:

Well I can put, well I am arguing now in the context of a political debate in Australia that there is a risk but obviously if the Parliament decides in its wisdom otherwise then I will put the best case I can.

JOURNALIST:

(inaudible).

PRIME MINISTER:

No, no it’s not being hypocritical, it’s upholding my responsibilities.

JOURNALIST:

Mr Howard, what’s stopping you from continuing to sound out the Americans, continuing to negotiate with the Labor Party…

PRIME MINISTER:

Because they have made it very clear that they’re going to leave it to the domestic Australian political process to resolve, they have made it very clear that they’re not going to express a definitive view in advance of the Australian Parliament having made a decision. They’ve made that very clear and I accept that, I think that is the right course of action but they’ve also made it very clear that they reserve their position. Now I think that is entirely proper, I think it’s entirely consistent and I think it’s entirely proper for me to express domestically in my concerns but obviously if the Parliament decides to support this amendment I will put the best if I’m asked to, I will put the best possible explanation.

JOURNALIST:

Prime Minister, you know better than most people perceptions are very important in politics. You have said before that you held back an American attempt to try to change the PBS. Why won’t this be seen as yet another attempt by the Americans, a thin edge of the wedge as it were, to try to undermine the PBS?

PRIME MINISTER:

Why won’t it be seen?

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JOURNALIST:

Why won’t it be seen?

PRIME MINISTER:

Well we haven’t had, now hang on, we haven’t had, the Americans have not said no, they’ve just indicated they reserve their position and they have expressed concerns. But we don’t ultimately know what the American position is.

JOURNALIST:

Prime Minister, given that you’ve said that this amendment is unnecessary and that evergreening is not a problem in Australia, would the Americans have anything to worry about from this amendment?

PRIME MINISTER:

Well if it’s unnecessary the Americans can well argue, if it’s unnecessary because there are already adequate protections for the PBS, why should we accept on behalf of American companies the imposition of a penalty in relation to a pattern of behaviour which is not taking place? I mean that is just a gratuitous imposition of new penalties. I mean there's no principle of commerce or fairness which says that irrespective of the behaviour of a company, the imposition of any additional burden and penalty is always acceptable and always justifiable. I mean that may be the view of people who have a permanently prejudicial view about private enterprise, but if a company is behaving properly and is complying with an already strict law which prevents that company behaving in a predatory way, why should that company accept the imposition of a new penalty which is unnecessary? And that could well be the attitude that is taken.

JOURNALIST:

If there's no threat to the PBS under the FTA, why would the Americans be concerned about some additional amendments which are designed to ensure that that's the case?

PRIME MINISTER:

Jim, if you believe that there is no threat and if you believe the law is already tough, it is human nature if there is yet... there is a further penalty and burden and threat imposed which is unnecessary, it is human nature to object to it.

JOURNALIST:

(inaudible) by the close of business today?

PRIME MINISTER:

I don't know. That's a matter for the Senate. I would expect the Labor Party to deliver on its commitment to pass the Free Trade Agreement if its amendment is accepted, and I would expect that to occur in the next day or tomorrow.

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JOURNALIST:

I think you said at the beginning that it was the spirit of the Agreement that the Americans were concerned about. Is it the spirit or is it the wording?

PRIME MINISTER:

Well I think there's a danger of both.

JOURNALIST:

Mr Howard, why not continue to argue your case and bring this matter back to the parliament at the next sitting fortnight?

PRIME MINISTER:

I don't think there will be any change in attitudes. That's why. The Labor Party is not going to change its attitude, I've expressed my concerns, the Americans are going to hold back. They are not going to express a definitive view, for very good reason, in advance of the parliament making a decision. They've made that very clear, and I think they're quite correct. If they were to express a definitive view, they would be accused of intervening in Australian politics on the eve of an election in relation to an issue which is clearly a point of contention between the Government and the Opposition, and I think the American position is entirely correct, and there's no way they're going to shift. But they have made it very clear to us overnight that they reserve their position. Now I'm not saying they are going to raise an objection. They may not. But they have at a departmental level expressed concerns - they have done that, and they did that of their own volition. And we are persuaded, on the basis of our own advice, that there is a possibility of this amendment, for the reason I have outlined, being seen as inconsistent with the terms of the Free Trade Agreement. Now I hope that does not happen, and I will do my best, if I'm asked to, to argue that it should not happen, for all sorts of reasons. But I have an obligation to point that out, and it was pointed out in the discussion that I had with the Leader of the Opposition and his Spokesman on Trade. And we suggested some amendments which would reduce the possibility in our view, but those amendments have plainly been rejected. Now okay, I am perfectly prepared in those circumstances to go ahead, let the amendment go through, and hope that it doesn't cause a problem because that is plainly the national interest thing to do. I mean there's nothing to be served by prolonging this debate because Labor is not going to shift. We want the Free Trade Agreement. There is a risk. I hope that risk does not turn to reality, and I'll do my best as Prime Minister to ensure it doesn't. But I would be failing in my obligation if I did not point it out. I have pointed it out privately to the Opposition. I'm now pointing it out publicly. So

if there is a problem, it will be exclusively the fault of the Labor Party.

JOURNALIST:

Is there anything in writing that removes the concerns? Have they given...

PRIME MINISTER:

Well the Americans have conveyed in different ways their concerns, but...

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JOURNALIST:

In writing?

PRIME MINISTER:

Well they deal with Governments. They don't deal with Oppositions. And they're staying out of the domestic political debate. But I can assure you Michelle, we're not making this up, but equally I'm not predicting that there's certainly going to be a problem. I'm simply saying to you there could be a problem and it's not just a tiny possibility. There is some possibility. I hope I'm wrong. We tried to reduce the possibility, but the Labor Party obviously doesn't have the same zeal for the Free Trade Agreement as we do, and therefore, if in the final analysis it were to fall over, I don't think there would be many broken hearts in the Labor Party. There would be a few, but not many.

JOURNALIST:

(inaudible) popularity with Congress and the warm words that the President has welcomed this Agreement with, what a great thing it will be for both sides - for the US and Australia - it's implausible that the thing would fall over...

PRIME MINISTER:

Well I've learnt in political life there are few things that are totally implausible. The unexpected often happens. Look, I hope that my concerns are completely groundless and I'm not suggesting that it is going to fall over. I'm just telling you there's a possibility, and the Americans have reserved their position.

JOURNALIST:

Is it possible that (inaudible) middle of our election...

PRIME MINISTER:

I don't know. That's asking me to name the date, isn't it, which I'm steadfastly refusing to do because I haven't made up my mind.

JOURNALIST:

(inaudible) bowled by a Labor googly here on this issue?

PRIME MINISTER:

No, I don't. I think that what has happened here is that the Labor Party has tried to rescue some... or salvage some of their political position in relation to the Free Trade Agreement, but they have an indifference to the Free Trade Agreement that I don't have. I mean I'm a true believer in the Free Trade Agreement. Mark Latham is not. And that is the difference, and therefore he doesn't really care if he's running a risk of the Agreement being in some way put into jeopardy.

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JOURNALIST:

(inaudible) got involved in trying to suss out how this is likely to go? Have you had talks with any of your counterparts in the United States or...?

VAILE:

No, obviously we've been assessing within Government and within our departments and seeking advice from the experts and the legal people within our department in terms of some of the detail of what has been proposed. I mean as the Prime Minister pointed out, this final position and the amendments that have been put forward by the Labor Party are significantly different to what was outlined coming out of Caucus Tuesday week ago in terms of the proposed penalties on spurious patent applications, to where it is today. And so obviously we've been working through those issues, and as the Prime Minister said, the process that is normally in place, once the legislation is passed by both countries, there's a period of time prior to an exchange of letters, and of course anybody is going to reserve their position. We're going to do the same about the American position.

JOURNALIST:

(inaudible) US to check this out?

VAILE:

We've got an Embassy in Washington that communicates on a daily basis with the Bush administration.

PRIME MINISTER:

And look, the Americans... you have to understand this Michelle. The Americans are not going to take sides on this. Zoellick had made this very clear.

JOURNALIST:

(inaudible) stand on the issue of Iraq, what's stopping them from putting forward a firm view on this issue then?

PRIME MINISTER:

Well we are much closer to an election. That issue directly affected a multinational operation, that's Iraq, and I think the circumstances are somewhat different. But whether you think they're different or not, they have made it very clear that because this is such a precise, direct area of conflict, on the eve of an election they are simply not going to take sides, and I think they're right and you can't expect them to.

JOURNALIST:

But haven't (inaudible) simply be expressing a reservation.

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PRIME MINISTER:

Well they have a right to do that because it affects... but that can be properly seen as acting in relation to their own position.

VAILE:

They haven't seen the legislation.

PRIME MINISTER:

They haven't seen the final form of it. They've seen the amendments.

JOURNALIST:

Prime Minister, what do you make of the comments of one of the nation's most expensive private schools that there is a hysteria driving parents to choose an independent education, and public schools need more money?

PRIME MINISTER:

Well I don't agree with her about the hysteria. As for the question of public schools needing more money, well I think the State Governments of Australia should spend more of the GST on government schools, and she's right about that. The shortfall in the funding of government schools over the last few years has been by the States. Our rate of increase of our share of direct funding for government schools has gone up at a faster rate than that from the States, and Judith Wheeldon is dead right in fingering the State Governments for not having given enough of the GST revenue to state government schools. You see, the great myth about this education debate is that state governments support state schools more generously than we do. That's wrong. Their proportion of direct funding has always been greater for historical reasons, but now they've got the GST, they should be giving greater rates of increase to government schools than they are. And if you look back over the last few years, you'll find that the rate of increase of our share of direct funding to government schools has been greater than from the states. And Judith is quite right in fingering the states. Their... if they had increased their money to government schools at the same rate as we have increased our money to government schools over the past few years, the government schools would all be a lot better off, so she is dead right on that point.

[ends]