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Transcript of interview with Leon Byner: 5AA Mornings: 21 April 2009: China FTA; Australian steel industry; US FTA; Doha Round; foreign labour costs.

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The Hon Simon Crean MP Minister for Trade

21 April 2009


Interview : 5AA Mornings with Leon Byner

Main topics: China FTA, Australian steel industry, US FTA, Doha Round, Foreign labour costs

LEON BYNER: Simon, it's good to talk to you.

SIMON CREAN: You too, Leon. How are you?

LEON BYNER: Good. Now, tell us about - I think it's fair to say that there was some optimism about a free trade deal with China. Where are with this?

SIMON CREAN: Well, there was optimism about four years ago when the previous government announced it, but they conceded market economy status to the Chinese, got very little in return, and the agreement was stalled for the next three years. It took us coming to government to reactivate it, to unfreeze it, if you like, Leon, and there have been a number of discussions over the past 12 months to try and advance it.

But it has to be advanced, and this is the point that I made yesterday. It can only be advanced if it is going to benefit both countries, and that's got to be not just in relation to us getting goods into their markets, but also services and also investment. They talk a lot about investment into this country, which

we think is important, subject to the national interest tests. But investment is a two-way street.

And so the whole purpose of trying to develop a trade agreement, if you like, is to build a framework that facilitates two-way trade.

LEON BYNER: Now, let me ask you this. Can you be a little bit specific here? What are the sort of things that Australia, in your view, would like to do and should be able to do in China that at the moment is somewhat encumbered?

SIMON CREAN: Well, we'd like to export more of our agricultural produce to China. That is restricted in a number of areas, and not just the…

LEON BYNER: Why is it restricted, when we could argue, Simon, as you'd agree, that the quality of what we send them is possibly superior to what they send us?

SIMON CREAN: But that's not the argument only with China, Leon. It's everywhere in the world.


SIMON CREAN: Ours is superior, and that's why it's in our interest to open up markets all over the place, not just China, and that's why we're pushing the Doha Round.

Why is that important to us as a nation? It's for this reason, that we are only 22 million people, Leon. Unless we engage with trade, we cannot sustain our economic future. You only have to look at the steel industry in your state, the automotive industry in your state, despite Mitsubishi going down. What's the strength of GM's future? It's in exports, not just producing for a domestic market.

The same with steel. When Labor introduced the Steel Plan in the '80s, it was about making it an internationally competitive industry. The steel industry exported last year something close to $2 billion worth of steel products.


SIMON CREAN: Sure, they're down in the current circumstances, and that's the consequence of the whole global economy tanking, but Australia's future has to be built on trade. Trade is good. Trade doesn't export jobs, exports create jobs.

LEON BYNER: Yeah. Well, what I want to ask you is this. China is already Australia's second largest export market…


LEON BYNER: …with sales of more than $30 billion in goods and services. So precisely - are we saying here that when we want to export agricultural products - and we're talking about China at the moment - they're putting barriers in our way that we don't put in theirs? Is that what this is about?

SIMON CREAN: Well, no, we - there are certain restrictions from there into us, particularly in the textile industry and in the auto industry as it stands. So yes, there are restrictions, but they are restrictions that apply in a global sense.

But that said, Leon, Australia in the main is a very open economy. But the reason we have to be open is because if we say we want access to people's markets, then we can't prosecute that case as effectively if we're closing off our markets.

LEON BYNER: Oh yeah, I understand that. See, one of our disadvantages, Simon, and I'm sure you would agree - and I've been banging on about this for some years - is that we've been very quick to do all the things which the intent of free trade was, although I think the term free trade's a bit of a misnomer and I think you'd agree with that. But the thing is now we're waiting for countries to reciprocate and they're being a bit slow.

SIMON CREAN: Yeah. Well, this is the argument as to how you've got to drive the harder bargain in terms of the trade agreements.

Now, what I think the previous government got wrong was that it didn't push hard enough on the, if you like, the global front, the Doha Round. It then defaulted to a whole lot of these free trade agreements and we didn't do as well as we should have because we didn't have a better framework off which to do the bilateral arrangements.

LEON BYNER: See, I'll give you a good example of this, and you can add some meat to the bone because you're in the portfolio and you'd know.

I spoke to one of our experts at Adelaide Uni, who is watching these agreements very closely, and I put to him a couple of times - his name's Patrick Wright and he's a very clever guy. I said, Pat, what's been the net value of the American Free Trade Agreement to Australia? And he said, well, you know what a zero looks like, don't you.

And I mean, that's really unfortunate because this was sold to us as some great ability for us to get into American markets. But you try and sell beef in there and see what happens.

SIMON CREAN: Yeah, well interestingly enough, beef, whilst there is some interest in beef into the US market, we have more offensive interest in other markets. Korea is a good case in point.


SIMON CREAN: And that's why we have recently announced the commitment to ensure that our beef industry does have its interests protected by getting improved access into the Korean market.

But coming back to the US FTA, we were critical of the previous government in some of it dealings on it. But we inherited this agreement; what we've got to try and do is to build off it.

But again I come back to this point, Leon, that Australia's future is dependent upon us engaging much more with the rest of the world. With 22 million people, you can't simply produce and sell to yourself.


SIMON CREAN: If we're going to secure our economic future, we've got to engage with the rest of the world. That means we've got to open markets; that means we've got the best way to get those markets opened is through concluding the Doha Round.

LEON BYNER: Just explain to people what that is.

SIMON CREAN: Well, essentially it's 153 countries all agreeing to drop tariff barriers.

LEON BYNER: Yeah, now, see, the EU have just - in fact they've gone to press recently saying, we're going to continue to subsidise our agricultural sector…

SIMON CREAN: That's right and…

LEON BYNER: …and that's not good for us.

SIMON CREAN: It's not good for us, and under the current world trading rules, Leon, they can do that. If we concluded Doha, they wouldn't be able to do it.

So, in other words, not only is Doha concluding important for opening up more market opportunities for us and reducing the subsidies that the EU and the US use, it's also important to stop the use of so-called legal methods but which are protectionist.

And we've got to avoid the development of protectionist tendencies because that creates the downward spiral. Once we start restricting our markets, other countries retaliate. That's what happened in the Great Depression, it made things worse. It's…

LEON BYNER: All right.

SIMON CREAN: …why the Doha Round concluding is so important not just to provide a new stimulus to economic activity but to stop the spread of protectionist tendencies.

LEON BYNER: My question for you is this, and that is that you know full well that many businesses in Australia, a lot of them are multinationals, are off-shoring - they call it best-shoring, I think that's an insulting term, frankly, it doesn't tell the truth at all.

But we're sending IT and other jobs offshore and people scratch their heads and think, gee, why are we exporting our wealth overseas, what's the benefit of that. You can't stop countries doing that.

But of course, corporations always chase cheap labour. And of course, we don't have - we're lucky, we've got wonderful standards here of great occ-health and safety, the union movement from where you come fought long and hard for many years, even going back to what was the Harvester Agreement where, you know, you had the fair day's work for a fair day's pay and so on. Things have changed a bit since then, but what I am saying is, the standards which we enjoy, in Australia, has been long fought for, but with the globalistic tendencies now of businesses to offshore whatever they can that's cheaper, it puts us at a disadvantage.

SIMON CREAN: You know, it very interesting, Leon, that most of the decisions that people take, Australian companies take, to invest offshore is not because they can access cheap labour, it's because they get better access to bigger markets and it's because they operate in countries in which using the IT value-adds cheap labour in that country, if you like, and becomes part of a global export chain. That's why it's happening; they're not in the main going there to take advantage of cheap labour, per se.

And Australia can't compete in the cheap labour market for all the reasons that you've said. We have higher living standards in this country and we want to keep them.

What Australia has to compete with and buy is through smart application, and that's all the IT applications, it's the skill base, it's the cleverness it's the smart manufactures, it's the services industry, it's the design, it's the application.

This is where Australia has got huge opportunity if we can get market access, if we can break down the barriers that prevent those sorts of activities participating more freely in overseas markets.

LEON BYNER: What hope is a country of 20 million got, twisting the arm of a country whose population is over a billion?

SIMON CREAN: Well, I think considerable because of this. We have considerable negotiating coin. We've got resources and they need guarantees, they need energy, security going forward because of their big expansion programs.

LEON BYNER: Simon, thank you for joining us today.

That's the Federal Trade Minister giving you a pretty detailed idea of where the Federal Government's at with regards to trade policy and particularly a free trade deal with China.