Topics: Trade deal with Indonesia, Australia’s international trade agreements; UK’s Brexit deal.

Transcript, E&OE

18 October 2019

David Bevan: Senator Simon Birmingham, Federal Minister for Trade and South Australian Senator. Good morning to you.

Simon Birmingham: Good morning David, great to be with you.

David Bevan: Now I’ve never negotiated a trade deal so I’m really not too sure what it involves. If I want to- say if I grow some wheat or some grapes or whatever and I want to put it on a boat, I just can’t send the boat into somebody else’s country and start offloading it to some guy who says he’ll buy it. You’ve got to have a trade deal. You’ve got to know what the rules are and that’s what you’ve been negotiating with Indonesia, yes?

Simon Birmingham: That’s right David. So different countries will operate in different ways. There’s obviously biosecurity checks and safety checks and customs checks and all of those elements. But then there are also things that are known as quotas and tariffs. Quotas being limits on the amount of a good that one country may accept from another. Tariffs being essentially a tax that they’ll put on imports from other countries and so what we’ve been able to do with Indonesia, following trade deals we’ve done with a number of other countries, is to be able to give Australian farmers and businesses better access into — in the case of Indonesia — what is a rapidly growing economy of of course large population right on Australia’s doorstep and that’s going to create big opportunities for our exporters in the years to come.

David Bevan: So when you say quotas and tariffs, we’re able to send more of our product now into Indonesia across a whole range of sectors, but also the tariffs that Indonesia will be placing on those products; they’ve been reduced or removed?

Simon Birmingham: So a mixture of those David. So it is very much a line by line type negotiation. So in the case of grains we’re going to be able to send 500,000 tonnes of Australian grains tariff free, tax free essentially if you put it that way, into Indonesia. Of course it then operates in their local market the same as if it was grown in Indonesia. In terms of if there are domestic taxes like our GST, that applies the same to everybody and that’s fair and square competition, you don’t have those additional import taxes.

And the success we’ve had through our agreements with Japan, Korea, China, some agreements with multi country arrangements, has got Australia to a point where we now routinely export more than we import each and every month and recorded a record trade surplus for the last calendar year. So we’re enjoying great success. The hard yards are done by our farms and businesses. The government negotiations crack open the doors to give them a chance to walk through and hopefully sell more great Australian produce and services.

David Bevan: Now according to The ‘Tiser the South Australian exports to Indonesia pretty much crashed between 2011 and 2018. What happened?

Simon Birmingham: We had a number of problems for Australia as a whole in that time. The decision to ban cattle exports to Indonesia really hurt economic relations between Australia and Indonesia at that time. So Indonesia tended to go and look for other markets to go to. So it wasn’t just that we lost out in the cattle trade but it hurt ties right across the border. So there’s been a bit of rebuilding to have to be done in terms of relations and you know SA itself is only around $300 million at present of exports to Indonesia and that’s only about 3 to 4 per cent of the national total. So even if we just think about trying to work SA up to the national share of our population and economy usually sitting around that 7 per cent marker or so, there’s huge potential upside before we then look at how much hopefully we can grow exports into that market. Indonesia’s economy currently grows at around 5 per cent per annum, that’s close to twice ours. They’re striving more for like 7 per cent and of course they’re trying to build a bigger middle-class, the likes of which we’ve seen China do successfully and other Southeast Asian nations.

David Bevan: Okay. But just working from Claire Becker’s story in The ‘Tiser you’re hoping that South Australian exports from- to Indonesia will grow from about 290 million to a billion. That’s triple in the next 10 years.

Simon Birmingham: Well that estimate is Business SA’s figure, but we certainly back them in that ambition because the types of products that we’ve created access for, citrus is of course a huge one for Riverland producers and we’re able to get now much better access there. Horticultural products, so if you go up to the food bowl around Virginia and Two Wells way and again, we’ve got better access for a number of horticultural goods, grains, as I’ve discussed already. If we look there, and SA remains one of the nation’s powerhouse grains exporters. And red meat and you think about the growth we’ve seen of Thomas Foods and not just in terms of exporting red meat as a commodity but what Thomas Foods has been so successful with is value adding, branding, packaging and all of those things that we want to encourage as well that bring a higher value to the exports.

David Bevan: But before you leave us, what are the Indonesians get out of this? Because the front page of The Australian today says that serious concerns have been raised by unions over temporary skilled migrants flooding in and taking Australian jobs here.

Simon Birmingham: So a bit of misleading from the unions there. The work rights that are created are very limited and essentially only amount to working holidaymakers. So that’s the category of visa that we give to young people who are under the age of 30 to be able to travel around Australia and work for limited periods of time. And so if you think about the rite of passage years ago of many Australians going to the UK and many Brits coming to Australia, it’s the same type of concept that we now apply. But you’ve got to be in the Indonesians case under 30. It’s capped initially at 4000; it’ll grow to a cap of 5000, under 30-year-old Indonesians who based on our experience of working holidaymakers, overwhelmingly work in the agriculture sector, in the tourism sector. Those sectors where there’s demand for seasonal workers who are willing to travel around the country and actually, pretty much spend all that they’re earning while they’re here.

David Bevan: In a moment, we’re going to talk to Professor Clem Macintyre from Adelaide Uni about Boris Johnson and the deal that he says he’s cut with the European Union. Now, he’s got to get that through the UK Parliament. But Simon Birmingham, what’s your take on the news that’s come out of Britain and Brussels in the last 24 hours?

Simon Birmingham: Well it’s- there’s never been a shortage of news around Brexit over the last few years and it’s a challenge sometimes to keep up. But what appears to be the case here is obviously, an agreement between the UK and the EU that would allow them to continue the operation of the existing customs union until the end of next year; separate provisions applying to Northern Ireland. And if that is legislated by the UK Parliament and approved by the EU system as well, that would give us time to be able to charge ahead and negotiate as we’re seeking two trade agreements with the EU and with the UK hopefully achieving them both by the end of next year and being able to get them to come into force around the same time that that ending of the Customs Union occurs.

David Bevan: Do you – are you excited thinking — look, whatever if the good or the bad of Brexit is for the UK and that’s up to them, there are huge opportunities for South Australia to get in there and make — and Australia and make a dollar?

Simon Birmingham: Look, there are big opportunities across the EU and the UK and so we already are negotiating with the EU and were the UK to decide to change its mind and stay within the European Union, well our current negotiations with the EU would hold fast there and encompass the UK. If the UK go ahead and get out, well then we’ll have separate negotiations with the UK. Certainly, if you look back decades to go to when the UK went into the European Union, Australia lost a lot of market access at the time. We suddenly faced lower quotas, higher tariffs to go back to the start of our conversations. So smaller volumes of goods facing higher taxes to get into the UK.

We certainly hope that we can negotiate both with the UK and the EU, better access for our farmers and businesses into the future so that they can get more goods and services of greater volume at lower taxes into those markets once again. And whether that is done with the 28 countries as one bloc or as 27 in a bloc and the UK separately, we’ll deal with whatever circumstance comes along.

David Bevan: Trade Minister Simon Birmingham, thanks for your time.

Simon Birmingham: Thanks so much, David.