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Trade News - 2009

► The Hon Simon Crean MP, Minister for Trade: Visit to Brussels, 21-23 June 2009: Speech at EPC and joint press conference with Commissioner Ashton

1) “Australia and Europe: Partners in Progress”, Speech at European Policy Centre, Brussels - 23 June 2009

Introduction

Dr Missiroli, Distinguished Guests, Ladies and Gentlemen.
It is an honour to be here at one of Europe’s premier think tanks, the European Policy Centre.
I would like to thank the Centre’s distinguished Director of Studies, Dr Antonio Missiroli, for his generous introduction.
Dr Missiroli, who visited Australia in April, deserves a great deal of credit for making today’s event possible.
This is actually my third visit to Brussels as Trade Minister.
I was the first Minister of the Rudd Labor Government to visit this historic city after the 2007 Australian Federal election, and I am delighted to be back.

Australia and the EU
The Australia-Europe relationship has gained considerable momentum since Australia’s Prime Minister Kevin Rudd visited Brussels in April 2008 – when he too addressed the European Policy Centre. Mr Rudd spoke then of the ‘intrinsic importance’ of trade and investment between Europe and Australia.
During that visit, Mr Rudd and EC President Barroso made a political commitment to invigorating our relationship.
As a result of their commitment, we have seen improved atmospherics and a new sense of dynamism and purpose in our cooperation.
We have finalised a comprehensive Partnership Framework, a milestone which I will talk about in a moment, and we have achieved concrete results on a number of other initiatives.
All of that progress is most welcome, because at a political level, we can honestly say that Australia’s partnership with the EU has never been stronger than it is today.
My main message today is that it is in both of our interests – now more than ever during these particularly challenging economic times – to keep that momentum going, and to make the most of our partnership.

We need to build on our common interests, and show political leadership in addressing 21st century challenges, including on world trade and climate change.
Yesterday I had discussions with EC Trade Commissioner Ashton, and I will have further talks with her today when we open our Trade Policy Dialogue – the first time that we have a ministerial component.
I also had discussions last night with Belgium’s Deputy Prime Minister and Foreign and Trade Minister Karel De Gucht, who recently visited Australia, and business representatives from Europe and Australia.
And on Friday, in Paris, I will host a roundtable, between European and Australian firms, in order to encourage a better understanding of what Europe and Australia can offer each other in terms of clean-energy and co-operation on the environment.
The challenge is there for us, together, to lead the way on renewable and clean energies, to find alternative sources for our growing energy needs and achieve true energy security.

The Economic Relationship
I would like to begin by looking at our economic relationship.
In my view, tremendous potential exists to take it to a new level by expanding the diversity and the volume of our trade and investment links.
The EU, as a bloc, is already Australia’s largest trading and investment partner.
Two-way trade reached $91.3 billion in 2008, accounting for over 16 per cent of Australia’s total trade. The balance of trade is weighted heavily in the EU’s favour.
The EU is our third largest export market, after Japan and China, with coal, minerals, wine and gold our major merchandise exports and travel services, transportation and business services our major services exports.
Australia imports from the EU a range of manufactured goods, including motor vehicles, medicaments, gold, aircraft and parts and engineering equipment.

Two-way investment is also significant.
The EU is the largest source of foreign investment in Australia, totaling A$133 billion of combined foreign direct investment at the end of 2008, and is one of the largest destinations for Australian foreign investment, with A$43 billion in direct investment in the EU at the end of 2008.

Australian companies are making a name for themselves in Europe in sectors such as environmentally friendly technologies, energy, logistics, and medical equipment and technologies.
According to EC delegation estimates, some 2,300 EU companies do business in Australia. They have a total turnover of about $180 billion, directly employ 400,000 Australians and – through flow-on effects – support an additional 775,000 Australian jobs.
Europe can look to Australia also as a stable and reliable long-term supplier of Europe’s energy needs, including clean energy, where Australia possesses some impressive strengths.
One of the most recent European firms to leverage opportunities in Australia in this sector is German global investment company Direct Invest.
Direct Invest’s project – which I, together with Queensland Premier Anna Bligh, announced on 11 June – involves a commitment to develop a mine in the Surat Basin area and to invest in up to $1.5 billion over the next five years in clean coal technology projects, including coal to liquid (CTL), gas-to-liquid (GTL), as well as carbon capture and storage.
This investment by Direct Invest, which was facilitated by Austrade, highlights the significant potential in more sustainable energy conversion. It underscores Australia’s comparative advantage, not just in commodities but value-adding and energy conversion.

The Australian Economy
As Trade Minister, I can tell you that Australia is keen to encourage more European investment in areas such as biotech, ICT, financial services, infrastructure projects and clean and renewable energy, to name but a few.
Australia is ranked the third most cost-competitive country for business operations in the major industrialised world.
Our business friendly political, legal and regulatory environment makes Australia a safe investment destination.
Our education and research institutions are world class – the EU by the way is Australia’s largest scientific partner.
We have a hard working, highly skilled and culturally diverse workforce.
And like Europe, Australia is closely integrated with the world economy.
Australia knows how to do business with Asia. Chinese dialects, for example, are the second most widely spoken language after English.

I will publish with this speech a series of slides that underscore how the Australian economy has been performing relative to Australia’s major trading partners. They tell a good story about the robustness of the Australian economy:
At present most of our top 10 trading partners are in recession. India and China are the stand-out exceptions, but their growth is still slower than in recent years.
Yet the Australian economy, virtually alone among the advanced economies of the world, grew in the first quarter of 2009, a modest 0.4 of a per cent. Most OECD countries – and all of those in Europe bar Poland - were showing negative growth in that same quarter.
Our retail sales are up. Housing finance and building approvals are rising. Business investment in the first quarter showed some growth. And consumer confidence seems to be rebounding. Unemployment in Australia has risen, but not as dramatically as in Europe or the United States. And while export values have decreased, volumes of net exports have increased.
These trends give us grounds for cautious optimism, though we know we are not out of the woods yet.
The Australian economy has been better cushioned than most countries against the global downturn because of our geography – Asia has been for some time at the centre of our export strategy. We are ideally positioned to take advantage of the dynamism and growth of the Asia-Pacific region, and that is one of the keys to the resilience of the Australian economy during this global economic downturn.
The other is competitiveness borne out of long term structural reform that we commenced in the 1980s. The Government has also successfully introduced stimulus packages that have supported economic growth, buoyed business confidence and kept workers employed.
Australia’s trade policy is based on the twin pillars of improving export market access at the border – through multilateral, regional and bilateral mechanisms – and domestic structural reform behind the border to improve out international competitiveness.
Our domestic stimulus strategy in response to the global financial crisis not only encourages consumption, but through major government expenditure programs we are also investing in the key drivers of economic growth – skills, innovation, and infrastructure.
And despite all that, the Australian Government’s net debt as a percentage of GDP will remain manageable.

The Broader Relationship
I would now like to talk about the ways in which we are taking forward our shared interests at a political level. There are many reasons why the relationship must and will grow.
Since 2008, we have seen a marked stepping up of high-level visits and exchanges between Australia and the EU on economic matters - including the Trade Policy Dialogue, which takes place later today and which for the first time will include a Ministerial-level component.
The European Minister Commissioner for Fisheries and Maritime Affairs, Mr Borg, and the European Commissioner for Energy, Mr Piebalgs, were in Australia recently for talks.
I was pleased to have the opportunity to meet both of them.
Belgian Deputy Prime Minister De Gucht, whom I mentioned earlier, also recently visited Australia accompanied by a business delegation, as did Italian Under-Secretary for Trade, Mr Urso.
Those and other visits have reinforced our economic synergies, as well as the goodwill, that now exists on both sides. We do have our differences on some issues – that is natural and we need to be frank about those. We must strive for better access beyond the traditional prism of differences over agricultural market access. And I don’t need to rehearse for this audience Australia’s concerns about the Common Agricultural Policy (CAP).
The Agricultural Trade and Marketing Experts’ Group, which deals with marketing of agricultural commodities, is also important from a trade perspective. It meets next on 8 July, in Canberra.
We also have differences on fisheries – but I believe there is scope there to build on our complementary interests in order to overcome our differences.
The sustainability of fish products is obviously a major concern here in Europe.
Australia’s seafood industry – in particular the aquaculture sector – is a world leader in environmentally sustainable practices.
Among the fish species Australia commercially produces are yellowtail kingfish and mulloway.
These fish are farmed commercially in an environmentally sustainable manner, in South Australia, to the highest standards. That is, they have closed the life cycle and so there is a sustainable supply going forward.
In this case, we are asking the EU to consider reducing the tariffs applying to these Australian farmed fish – this would not displace EU’s domestic fish products and it would actually serve a broader ecological purpose by helping reduce pressure on depleted wild fish stocks, increasing their ability to recover. In fact, European industry wants these fish.

This issue just highlights the fact that our interests are more convergent that many people appreciate, and through a bit of creative diplomacy, we can identify solutions to problems that in the past may have seemed intractable.
That brings me to the EU-Australia Partnership Framework, which was launched in Paris last October.
The Framework gives concrete expression to the commitment Prime Minister Rudd and EC President Barroso to forge a new and broad-based relationship.
It does so in five broad areas that highlight the diversity of our common interests:
• foreign policy and global security
• the multilateral trading system and bilateral trade and investment relationships
• cooperation in the Asia-Pacific, where the EU – the world’s largest provider of international development assistance - is playing an increasingly important role
• increasing cooperation on energy issues and climate change
• research, science, education and innovation.

What is so important about the Partnership Framework is that it is a practical, outcomes oriented document that can be reviewed and regularly updated.
It sets out immediate, medium and long-term objectives, each with multiple activities to promote close cooperation and policy coordination.
We will review progress against those objectives at the Australia-EU Ministerial Troika Consultations in October.
What that review will highlight, I am confident, is an impressive list of achievements.
• It will show how Australia and Europe have worked together to develop effective responses to the global economic crisis
o including close cooperation in the G20 on fiscal stimulus, regulatory reform, IFI reform and resourcing, and protectionism
• It will document our joint efforts to conclude the Doha Round
• It will underscore our close consultations on challenges to global security, such as the need for better coordination of our efforts in Afghanistan
• It will applaud the new Australia-EC Wine Agreement, the EC’s decision to become a founding member of the Global Carbon Capture and Storage Institute, and recent progress in negotiating a Comprehensive Air Transport Agreement.

But what the review will also highlight, I expect, is how much work there is left to do – and how much Australia and the EU need to cooperate – in tackling the complex global challenges that affect our long-term strategic interests.

The World Economy
The current global economic situation, for example, makes strengthening our partnership more important and more urgent.
The world economy is suffering its most severe downturn since the 1930s. It is expected to contract by 1.3 per cent in 2009.
World trade volumes this year are expected to drop even more sharply, with predictions ranging between 9 per cent (WTO) on the low side and 13 per cent (OECD) on the high.
Trade, as I’ve often said, is a multiplier for the global economy, given world trade since 1950 has grown three times faster than world output.
Unfortunately, we are now seeing that multiplier working in reverse.
Trade will be part of the solution when the recovery comes, and that just underscores the importance of having the right trade policies in place.
Keeping markets open will open up new opportunities for exporters and spur growth.
Protectionism, which we’ve seen signs of, including here in Europe, will only prolong this crisis.

Doha Round
That is why Australia and the EU attach such importance to reaching a comprehensive agreement in the Doha Round as soon as possible.
We must keep trade open and flowing if the global economy is to recover quickly.
Concluding the round would boost global confidence and help rekindle economic growth.
Australia and the EU share a similarly high level of ambition on the services market access negotiations, and we need to work closely to ensure services are a part of a balanced Doha outcome.

We need to capitalise on the fact that the global economic crisis has given the Round new profile and impetus.
At last April’s Summit in London, G20 Leaders recognised the importance and urgency of concluding the round.
Their mandate has energised governments and trade ministers, including members of the Cairns Group, who met earlier this month for a ministerial meeting in Bali, along with USTR Kirk, Indian Commerce Minister Sharma, WTO Director General Lamy and EU Ambassador to the WTO Guth.
That Bali Ministerial proved a valuable opportunity for the Cairns Group to push forward our Doha Round agenda and take a strong position against trade protectionism, including EU and US dairy subsidies.
At a time of depressed world dairy prices, those subsidies will further weaken the global market and slow the recovery in international prices even more.
We need the European Union and the United States to take a leadership role in demonstrating a commitment to bringing the Doha round to a conclusion.
I will continue to work with my ministerial colleagues - including Commissioner Ashton - to help resolve the outstanding issues and finish the Doha Round negotiations.
Later this week, for example, I will be hosting an informal gathering of trade ministers in the margins of the OECD ministerial council meeting in Paris to try to re-ignite serious negotiations, and in doing so, boost confidence in the global economy.

Climate Change
I would now like to turn to climate change, which is, in the Government’s view, “one of the greatest moral and economic challenges of our time.”
Importantly, both Australia and the EU have announced ambitious targets to reduce global emissions, which is helping to provide momentum to the international negotiations in the lead-up to Copenhagen.
• Australia has announced that it will reduce its greenhouse gas emissions by 25 per cent on 2000 levels by 2020 if there is a global agreement sufficient to stablise greenhouse gases at 450 parts per million carbon dioxide-equivalent or lower.
• The EU has committed collectively to reduce emissions by 20 per cent on 1990 levels by 2020, and to increase this to 30 per cent in the case of a successful global deal.

It is in every country’s national interest to see an ambitious global agreement on climate change. Our goal is to develop an effective market-based mechanism that rewards climate friendly initiatives, and creates incentives for the private sector to make the transition to a low-carbon emission economy. Assistance, particularly to export-exposed industry, is critical.
I believe there is a growing complementary of views between Australia and the EU on climate change, and that we should be working more closely on this challenge.
We have much to offer each other and much at stake.
We must get this right. We must give business certainty and capitalise on the opportunities for both Europe and Australia, in terms of creating green collar jobs.
A key point is that it is in our interests to ensure that trade measures employed to address climate change are consistent with the principles of maintaining an open and transparent, rules-based international trading system.

Conclusion
Australia and Europe are like-minded on most political, economic and strategic issues and we enjoy a profound commonality of values. Trade and capital flows are vital to securing our economic futures.
European companies increasingly recognise what the Australian economy has to offer in terms of our connections to Asian markets, the health of our economy, skills of our workforce and the calibre of our financial, legal and regulatory systems.
We want to encourage more European businesses to look at Australia as a base for their operations in the Asia-Pacific region.
Australian companies are embracing the market opportunities that Europe’s market offers, just as the Australian Government is embracing new opportunities for closer cooperation and constructive dialogue with Europe at a political level.
Based on our shared interests, Australia and the EU now have an opportunity to show work more closely together on the challenges of our times, including climate change and the Doha Round.
Our Partnership Framework marks a significant new chapter in our relationship, providing a durable blueprint for an ambitious agenda. But the challenge is there for us to seize this opportunity.
Australia is fully committed to devoting the creativity and energy necessary to take that agenda forward.

Thank you.

2) Joint Media conference with European Trade Commissioner Catherine Ashton following the 5th European Commission Trade Policy Dialogue, Brussels

TOPICS: Australia-European Union relations, advancing the Doha Round, Australia-China FTA talks

Commissioner Ashton: It is nice to see you all. It is especially nice to welcome a colleague and a good friend, Simon Crean, Minister for Trade from Australia. This is an important day because we have had a ministerial level Australia-EU trade policy dialogue. That’s critical for us to sit together and being able to discuss issues of this importance. We’ve used the time as well to do something very practical, because we initialled and signed our reviewed mutual recognition agreement and that’s important for our companies, because it helps to simplify how they’re able to operate in Australia. But we’re always looking for ways we can enhance our bilateral trade cooperation, so a large part of what we have been doing - formally today, informally yesterday and we will be continuing as we move to Paris for the OECD meeting — is thinking through what more we can do to strengthen and deepen the collaboration and the cooperation between the European Union and Australia, on all of this. Perhaps a special focus for us is thinking through the issue of climate change and the importance of how we develop our trade, in that context. So, I will if I may, hand over to Minister Crean.

Minister Crean: Thank you Cathy and a pleasure to be here with you. We have had a very warm mutually trustful relationship since you’ve taken the position over. And I’m delighted that the trade dialogue we have engaged in today is for the first time being elevated to ministerial level. It comes from our joint conviction that in terms of advancing the interests of our countries, there has to be the political will as well as dealing with the technical solutions. As Cathy has indicated, we’ve signed today an agreement that gives effect to some of that technicality, an agreement that will reduce the cost of doing business - that is a mutual recognition of each country’s regulatory framework, for the purpose of doing that business - and therefore a significant response to our commercial interests in both the EU and Australia. Beyond that, we talked about a number of other issues in terms of furthering the bilateral relationship. Particularly in the areas of mutual support, areas that go to energy efficiency, to logistics, to services. Even though there are issues in the traditional sense of product movements, we’ve taken the relationship beyond the prism of just talking about those. Clearly, there is potential in services and investment growth between Australia and the EU. A final point I’ll just reinforce is that not only have we talked about the bilateral relationship of doing business together, but working together to advance the multilateral framework. Both Doha, where we have been very close collaborators in attempting to move the agenda forward, and the meeting that we’re both going to on the margins of the OECD in Paris over the next couple of days, we hope, will move it another step forward. And finally, on the question of climate change, a realisation on both of our parts that, rather than just talk about the threat of climate change, what are the opportunities, where are the green collar jobs, how can we together not just come up with technical solutions in terms of abatement and addressing climate change, but creating new job opportunities for our respective economies. So, it’s a pleasure to be here. Cathy, thank you very much for hosting today. We look forward to your return visit to Australia. But I think that this is an historic day in that we have elevated the relationship, we’ve given substance to, not just the trade dialogue, but in the context of the partnership framework …that emerged from our Prime Minister’s visit here last April.

Journalist: Two questions. One for both of you, one for Mr Crean. For both of you, at the OECD, what concretely do you hope can be achieved related to Doha? What do you think of the opportunities of a mini-ministerial? I know that the Indians are quite keen to hold one in September, October, do you think it achievable? Mr Crean, on China, you have obviously been travelling there, I believe, recently, quite regularly. What are the chances of re-opening the FTA talks with China, and if so, what sort of a timeframe, maybe for the end of the year?

Commissioner Ashton: First, I’ll say a little bit about the ministerial meeting that is in the side margins of the OECD which is being led by Simon Crean. So, he will say more about it. For my part, what I want to see is the progress that we all have been ambitious for, now that we have the government of the United States formally committed to completing the Round. Of course, new Minister Sharma who has indicated, from everything I’ve read, that he also is very committed to bring things forward. What I hope we’ll see is progression of the discussions. And perhaps to the point where we’re actually inviting our colleagues to instruct us, to instruct senior officials to move forward. It is difficult to be clear about what the outcome will be. But I’m going to Paris with a very strong conviction that we now need to move forward speedily and we need to set a timetable in that respect.

Minister Crean: What we are trying to get out of Paris is building on the re-engagement decision that was taken at a recent meeting in Bali of the Cairns Group participated in by Ron Kirk from the USTR and by Minister Anand Sharma. Also present at that meeting as participants were the EC, China and Japan. So, it’s a commitment to re-engage that we want to reinforce in Paris. But we want to take it the next step, as Cathy has said, to send a very strong signal about the need for officials to meet through the various formats within the multilateral framework to resolve the outstanding issues, to try and move us to the end game. We sense a political desire to want a move to the end game. We have to capitalise on it. In many senses, this is us acting on the direction that the G20 leaders gave us last November, which we haven’t until now, because of various elections around the place, been able to properly discharge. But we are encouraged very much by the commitment and we want to build on that in Paris.

On the question of China, again, it comes back to the political will. I am convinced that China and Australia both want at the political level to conclude a free trade agreement. There are coordination issues that are in China’s domain that they need to resolve. So, we’re waiting for that to occur. In the meantime, we are not just waiting for the finalisation of the agreement. We are engaging actively in China at the commercial level. There are many areas of opportunity for us to develop cooperatively with China and what we’ve been seeking to do is to engage at the regional level as well as at the level of Beijing. The interdependency between our two economies is huge. China is our second largest trading partner and the interdependency isn’t just in goods movements, it is increasingly in services and significantly in investment flows. What we need is an agreement that reflects the modern framework. But we don’t have to wait for that framework to be concluded to continue to develop the trade relationship at all levels.

Journalist: Question for the Commissioner. Commissioner, can you tell us a bit more about how this mutual recognition agreement will reduce costs for European businesses doing business with Australia?

Commissioner Ashton: It’s quite simple. I will give you a classic example. If you produce equipment which needs to be certified to fit the right standards, then we recognise each others’ standards. So, rather than, if you’re producing medical equipment for example, having to go through the process twice which is costly, time consuming and occasionally, you know, you will find yourself trying to fit into a slightly different regime, we simply mutually recognise each other. And we know from business that although it seems a small element, it can be hugely costly to businesses operating. So, it’s to try and tackle that.

► Australia signs historic regional free trade agreement - 27 February 2009

Australian Minister for Trade, the Hon Simon Crean MP, joined Trade Ministers from the 10 members of the Association of South East Asian Nations (ASEAN) and New Zealand in signing the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) in Hua Hin, Thailand.

This is the largest FTA Australia has ever signed and will reduce or eliminate tariffs across a region that is home to 600 million people and has an annual GDP of A$3.2 trillion.

Australia’s two-way trade with the ASEAN region is worth $80 billion a year. The agreement will deliver new opportunities across the board for Australian exporters.

“With this level of trade, which is bigger than our trade with Japan or China or the United States, this agreement with ASEAN has great potential to increase job opportunities for Australian workers,” Mr Crean said.

According to Austrade, there are around 18,500 Australian exporters doing business in ASEAN countries.

“I have asked Austrade to roll out a commercial strategy to take advantage of the market openings created by AANZFTA,” said Mr Crean.

“Trade barriers are coming down in the region. Our challenge to Australian business and exporters is to look to South East Asia to take advantage of the new opportunities.”

AANZFTA will bind current low tariffs and over time eliminate tariffs on between 90 and 100 per cent of tariff lines, covering 96 per cent of current Australian exports to the region.

These tariff reductions will put in place a guarantee against sudden tariff surges and are an effective barrier against protectionist moves in the midst of the present economic crisis.

“This is the first free trade agreement Australia has signed since the onset of the global financial crisis,” he said.

“It powerfully demonstrates Australia’s - and the region’s - strong commitment to opening up markets in the face of this crisis. This will keep trade flows open in the region, increase growth, and give a much-needed boost to confidence,” Mr Crean said.

“This is an extremely strong signal to the rest of the world that the Asian region remains committed to pursuing economic growth, exports and jobs to help drive economic recovery.”

The FTA includes an economic cooperation component to provide technical assistance and capacity building to developing ASEAN countries to assist in implementation of the FTA.

“Australia regards this cooperation as an integral part of the FTA and I am pleased to announce that Australia will provide up to $20 million in funding for worthwhile capacity-building projects over a five year period,” Mr Crean said.

“Australia stands to gain from this agreement across many sectors, including exports of agricultural products, industrial goods and services.

“Australian primary producers are now being guaranteed greater access to developing South East Asian markets, many of which have a growing appetite for high quality Australian produce,” Mr Crean said.

The Minister for Trade said the Australian industrial sector had also been given an opportunity to expand exports into the ASEAN region.

“The Australian pharmaceutical industry, which already exports $600 million worth of product each year to the region, will be operating in almost a completely free trade zone in ASEAN,” he said.

In the chemical sector, most higher tariffs will be eliminated. For electrical machinery, almost all tariffs will be eliminated in our major markets.

With the car industry, Mr Crean said there had been tough negotiations and Australia would eliminate tariffs for all ASEAN nations.

“But there will be slower phase-out arrangements for tariffs on vehicles manufactured in Indonesia, Malaysia and Thailand as Australia demanded reciprocal arrangements with those countries,” he said.

Mr Crean said some of these higher car tariff schedules could be addressed in bilateral FTAs.

“I am pleased to say the agreement will achieve very significant tariff cuts on automotive parts and components,” Mr Crean said.

Makers of automotive parts will now have greater opportunities to participate in automotive global supply chains.

“We have also secured a good outcome on services, increasing certainty for exporters in fields such as professional services, education, financial services and telecommunications as well as construction and mining services”, Mr Crean said.

On investments, AANZFTA will create greater certainty for Australian investors in the region with access to international arbitration extended to the whole region.

“I am proud of this agreement, as it represents a historic milestone for Australian trade negotiations,” Mr Crean said.

The full text of the agreement is available on www.dfat.gov.au

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