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Minister discusses effect of sanctions planned by the United States on trade with Iran and Libya

REBECCA GORMAN: Australian companies have already been affected by Washington's decision to impose sanctions on any country that engages in major oil and gas projects with Iran and Libya. President Clinton signed the law yesterday, but Australian companies had already scaled down negotiations with the two countries targeted by the US in anticipation of the move. BHP, which has major holdings in the US, was involved in discussions with Tehran about a $1 billion gas pipeline between Iran and Pakistan. Those discussions are now winding back, and BHP has said publicly they'll abide by the US laws, which will penalise foreign companies which invest more than $40 million in Iran and Libya's gas and oil industries. Washington says Iran and Libya are key sponsors of international terrorism. The Australian Government has joined the Europeans and Canadians in protesting over the US move. Well, to discuss the implications of the new US law, we're joined in our studio now by Trade Minister, Tim Fischer, and, to speak to him, our chief political correspondent, Fran Kelly.

FRAN KELLY: Tim Fischer, Australia has strong trade ties with Iran and Iran was Australia's major trading partner in the Middle East last year. Will this US legislation affect that trade?

TIM FISCHER: It has a possibility of doing that. We are opposed to this legislation; equally, we're opposed to terrorism from any source, and that must be dealt with. But this type of approach by the United States is wrong in principle, the extra territoriality, and it is dubious in terms of its practical effect. Does anyone seriously accuse large Australian, South American or European companies of being directly involved in terrorism? Of course, they don't.

FRAN KELLY: Well, BHP, for instance, was already having discussions with Iran about a gas pipeline, a $1 billion project. It now looks as though those discussions will be affected by this third-party sanctions of the US. What can we do about that? Is there anything you can do, the Australian Government can do, to keep that project alive?

TIM FISCHER: In fact, both Minister Moore and myself raised this in very strong terms in our recent visit to Washington, as did Minister Downer. And when I went on to South America, the extent of bitter opposition from even NAFTA partners of the US to this whole principle of extra territoriality. In respect of Helms-Burton and Cuba, and now the D'Amato legislation applying to Iran and Libya, there is a widely-held view around the world, and Australia will continue to lodge its protest over the principle which sees the United States bring in yet another non-tariff barrier, restrict exports to the United States, if they're not happy with what an overseas company is doing in a third country. And it is that which Australia does object to, Australia is opposed to, and Australia will do all it can to resist.

FRAN KELLY: On the one hand, Mr Fischer, Australia is upgrading its defence ties with the US, it's giving them greater spying capacity via our bases, like Pine Gap, and, on the other hand, Australian companies are suffering from US domestic law that's limiting trade; they're also suffering from US challenges to Australian export assistance in the WTO. How is that a fair exchange?

TIM FISCHER: Well, indeed .. well, might you ask and, on Friday this week, I will launch a report further reviewing the Australian-US trade investment circumstance. Our relations on that score have a long way to go to get to an even keel in terms of a trading balance. There's some good progress. Australia and the United States work well together to have brought about some of the breakthroughs in the Uruguay Round but, at the end of the day, Australia exports very little to the United States or, in fact, the United States imports across to Australia a whole lot more than we succeed in exporting to the United States. The imbalance is now our worst imbalance and it is something that I, as Minister for Trade, and the Government are determined to deal with.

FRAN KELLY: Are you happy with the increased defence links we're making at the same time as this trade imbalance is occurring? Should we be holding back on the one plane until we get something a little more on the other?

TIM FISCHER: I hope, realistically, that indeed the goodwill flowing in the overall bilateral relationship, and there is a great deal of goodwill and depth in that bilateral relationship, will help rectify the problems which do exist and which cannot and should not be in any way bypassed on the trading front.

FRAN KELLY: But are you saying we will look at our trading relationship with the US?

TIM FISCHER: Yes, and indeed I will release a report on Friday in relation to that, and with a number of specific recommendations, and I've already had two lots of dialogue direct with the US trade representative, Charlene Barshefsky. Australia is about robustly pursuing its trading interests, its export efforts, with the United States, particularly where we have this huge trade imbalance.

FRAN KELLY: Well, Mr Fischer, how robust will you be? The European Union is taking the United States to the World Trading Organisation over these third-party sanctions. Canada is passing a law forbidding its companies to comply with the extra territorial ban. Will you implement any of these kind of actions?

TIM FISCHER: We will monitor the situation very closely. It is not clear that any Australian company will now be directly affected, but it is the indirect effect which is of great concern. I reiterate: terrorism must be dealt with from whatever source, wherever - in the Middle East or elsewhere - right around the world. It is an horrific problem in the 1990s, that the world is still confronted by massive levels of terrorism, and that has to be done, but this is not the right way and it is wrong in principle. It is questionable just what success it will bring.

FRAN KELLY: On another issue, Mr Fisher: earlier, at the head of the program, we heard a report that China is critical of the new security pact Australia signed with the US, and China's also questioning Australia's commitment to the Asia region, indicating that perhaps there's a preference now under the new government for the United States. Has the Chinese Government made you officially or unofficially aware of those concerns?

TIM FISCHER: There have been onward going discussions between Australia and China at various levels, most recently in Christchurch, and both Minister Downer and myself are scheduled to go to China later this month and we expect these matters to be raised. But, with regard to DIFF specific, please be advised that this government is committed to spend over $50 million on DIFF projects this financial year, 1996-97 - that's not generally realised - and there have been other adjustments made. So I think, at the end of the day, China will look at the totality of our very good bilateral working relationship as we further develop trade investment and tourism links, including new flights direct Sydney-Shanghai shortly.

FRAN KELLY: Well, you might describe it as a good bilateral relationship, but it would seem that the Chinese Government isn't describing it like that at quite this moment. Within five months of the Coalition Government, they're already comparing the Coalition Government with the Labor Government and casting doubts over your sincerity in that relationship. I mean, that's quite serious, isn't it?

TIM FISCHER: I reaffirm that Australia's top trading priority, Australia's top foreign affairs policy priority is East Asia. There has been no watering down of that commitment. The first Prime Minister John Howard met was the Prime Minister of Malaysia, Dr Mahathir, and also in the region, I should add, Prime Minister Jim Bolger from New Zealand. But we are absolutely determined to build our links with Asia, and that does not mean we don't have the right to go and look for extra exports into South America; that does not mean we don't have the right to build a proper balanced relationship with the world's largest economy, the United States of America - we'd be foolish to do it in any other way. And, at the end of the day, China will recognise that aspect, but both Minister Downer and myself, and others, will help put flesh on this relationship with the new Australian Government in the very near future.

FRAN KELLY: And yet, though, Mr Fischer, just to go back to the scrapping of the DIFF scheme - we've already heard in the Senate inquiry yesterday that our embassy in China has warned the Australian Government that there are Chinese concerns over the scrapping of DIFF, and we also heard reports from Australian companies yesterday who say that the scrapping of DIFF is affecting their trade with China and Indonesia, beyond the DIFF projects. Now, as Trade Minister, are you concerned about those reports from business?

TIM FISCHER: There's a range of weapons associated with providing export assistance and the Australian Government is looking at all of those in terms of the budget context. I am working though this issue. I note that committee is part-heard. I remind....

FRAN KELLY: Do you believe our Australian companies though?

TIM FISCHER: I believe that our Australian companies are very happy with our decision to commit to a second bridge across the Mekong River in Vietnam, perhaps more happy than those seeking a bridge across the Murray River in Australia. But we are going to get our aid project and priorities right, right around Asia, and we commit to an additional $50 million to DIFF - more than $50 million, I reveal - in the course of this financial year. I hope the parliamentary committee takes note of that.

FRAN KELLY: Tim Fischer, thank you.

TIM FISCHER: Thank you, Fran.

REBECCA GORMAN: Trade Minister, Tim Fischer, with chief political correspondent, Fran Kelly.