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Transcript of doorstop interview: Melbourne: 20 April 2009: Chinese economy; China FTA; trade finance; protectionism; Australian steel industry.

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The Hon Simon Crean MP Minister for Trade

20 April 2009

Transcript Doorstop Interview, Melbourne, after the Launch of the EFIC Global

Readiness Index.

Main Topics: Chinese economy, China FTA, Trade Finance, Protectionism, Australian Steel Industry.

QUESTION: I just wanted to, first of all, get your opinion on the latest China numbers that came out last week and whether you were in the school of thought that perhaps things could be stabilising a little.

SIMON CREAN: I've had a lot of involvement with China over the last 12 months and I've got no doubt it's the intention of the authorities to try and ensure that they don't let growth grow below eight per cent. Now whether that can be secured in any one quarter, who knows.

It's the - they're not immune either. But there are considerable signs of infrastructure build domestically within China and within the regions, it's been reflected in demand for certain of our resources, so I remain optimistic about the - not just the importance of China to the global economic recovery but the determination of the Chinese government to maintain that necessary level of economic growth.

QUESTION: Tell me, you mentioned in there the difficulties that you've encountered when trying to negotiate the free trade agreement and you were talking about potentially looking for other opportunities in Korea and the like, but how far are we away from that sort of a breakdown in the negotiations?

SIMON CREAN: No, I don't think that we're at the breakdown but I mean, you can't just negotiate with yourself. And the point of my last visit to China,

which was only a couple of weeks ago, was to establish if the political will still existed to finalise this agreement.

I've come away convinced that it does, so we need to get on with the task of finalising it, but there are some important thresholds which I referred to in there, we're now waiting for the response of the Chinese.

QUESTION: What do you think of the merits of the Government helping guarantee loans to exporters in the same way that the property sector?

SIMON CREAN: No, I don't argue that. I say though that there is a widening market gap and EFIC was established to fill a market gap, and so the opportunity, through existing structures, should be looked at through EFIC. But there's a broader question with EFIC which I was arguing last year before the global

financial crisis occurred, which still remains relevant, and that is that EFIC was established to plug a market gap for trade in product markets, in goods and yet the very big change that's occurred in trade is particularly into investment-related activities, so I think that there is a question of looking at that.

And that, I believe, was the case regardless of whether we had a global financial crisis or not.

QUESTION: So, there is merit for that, for something along those lines then?

SIMON CREAN: But that's to extend what's already there to pick up investment, not just product market, it's not new guarantees, it's not new product, it's extension of existing to cover the changing nature of what trade is.

QUESTION: If you could just talk about the threat of protectionism with the slow down, how would, on a scale of one to ten, how would you rate the threat of this crisis potentially on trade barriers?

SIMON CREAN: In Australia or globally?

QUESTION: Globally and for Australia.

SIMON CREAN: Globally, I think, if we don't conclude the Doha round, if it doesn't succeed, I think there is a greater risk of reversion to protectionism and we are starting to see some of those signs.

The discipline that's holding them back is, firstly, the existing rules that prevent it happening and secondly the desire of world leaders to do everything possible to stop protectionism and seeing the conclusion of Doha as part of that mechanism.

So I was particularly encouraged with the statements coming from the G20 meeting in London. Our task now is to try and build on that, knowing that we have leadership endorsement of the need to conclude Doha, get on with the task of doing it, and introduce a new set of disciplines.

QUESTION: Can you argue though that the same issues that you just outlined with regard to the free trade agreement with China not negotiating with yourself apply very much to Doha too...


QUESTION: ...we've been talking about...

SIMON CREAN: No, because...

QUESTION: ...a conclusion for Doha for a long time.

SIMON CREAN: Well, we have been talking about a conclusion to Doha for a long time, it's been going for seven years, but it was not until July last year that we had serious negotiation that was starting to get to an end point. And what we got to in July was 80 per cent of the way there. That you don't get to by just negotiating with yourself.

What we haven't done is to bridge the other 20 per cent. There are outstanding issues, they're do-able with the right political will. We've got the political will, we've got to conclude it, that's the difference on that front.

As for Australia, ... I do not believe that there is a strong body of opinion in this country that says our solution lies in reverting to protectionist mechanisms. It's a populist call but it's not a realistic one.

Australia is too small a country to be able to simply sustain itself by selling to itself. Protectionist measures invite retaliation and that leads to a downward spiral. We say, only Australian steel ... in infrastructure projects, no imports.

What does that mean for our exports which are close to $2 billion worth of steel? That's the fundamental problem.

Now, what we need to do though is to understand that Australian steel industry is a very efficient industry and should be able to compete against the big demand that we're going to generate internally for infrastructure and therefore the call on steel.

Australia learnt the importance, fundamental importance, of going global to securing our economic future, they were the reforms that were put in place in the '80s.

I don't think there is any serious body of opinion that says that we should turn back on ourselves but we do have to mange the sensitivity of this issue out there in the marketplace where people's jobs are threatened.

My argument is, trade is good for jobs, without trade we diminish our capacity to create jobs, that trade is a generator of jobs and Australia has to be confident in its competitiveness, its productivity capacity, it's got to go out there and chase more market share and that's where government and the role of government and its trade policy becomes a key component of providing the framework for that to happen.

QUESTION: We're seeing action through international bodies, international institutions like the G20 and you've just been talking about the impetus towards the Doha round, is there enough happening regionally in terms of regional institutions to address with the crisis? You talked today about the impact that the economic downturn has had across Asia and the impacts on China and those sorts of things. Is there enough cooperative work happening within the region as well and where is that happening?

SIMON CREAN: Well I believe so but I think the best example of that is the fact that whilst Doha failed in July to conclude, in August we moved to conclude the ASEAN free trade agreement which is a free trade agreement with 10 of our neighbours and two-way trade with them is $80 billion.

That's bigger than China, bigger than the US, bigger than Japan. This is a comprehensive free-trade agreement, it's the largest that ASEAN has - certainly the largest Australia has entered...It's the most comprehensive that ASEAN has ever entered.

So this was a ground breaking outcome.

Now is it the perfect agreement, no, could it be more ambitious from out point of view, yes. But it's a fundamentally new platform.

QUESTION: Does it provide that guiding mechanism in...

SIMON CREAN: It does, because what it's really saying to businesses in Australia and think about it, there are different levels of liberalisation depending on the country and the dependence of that difference is fundamentally a function of level of economic development of that country. The less developed the longer time it needs to take to adjust, that's normal in the scheme of trying to negotiate common agreements but with differentiated outcomes.

What Austrade is in the process of doing is, if you like, developing a matrix that can go to Australian businesses and say, if you're interested in this particular

sector, this is the market you can get into first in Asia, because it's liberalised sooner than others and after that you can sequence it.

You heard in there that the focus of those responding to the survey is that they target particular markets, they don't try and go for the region per se but to those aspects in the region that suit their circumstances.

What this new agreement does is to give potentially a much clearer roadmap as to where you focus and that's why businesses need to work very closely with Austrade, go to the website, identify the issues, where your product market is, look at the table, see where the liberalisation occurs, come and talk to us about how we develop a strategy going forward.

QUESTION: The May budget, what measures from the trade perspective would you like to see?

SIMON CREAN: I think that the important thing from the trade perspective is to see the commitment of the government to reinforce its fundamental message to date and that is that despite the global financial crisis, we've got to go for growth and that trade is important to that.

And that the ASEAN region, plus China plus India, are all still forecast to grow positively. There's the opportunity for Australia to secure market share. I think that's the message that we want to be seen coming from the budget.


Media inquiries: Clinton Porteous 0403 369 588