Interview on Radio National Breakfast, with Hamish Macdonald.      
Topics: Scott Morrison’s meeting with US President Donald Trump, US-China trade war, Indonesia FTA




Hamish Macdonald: Scott Morrison has met Donald Trump at the G7 in France overnight which is being held against the backdrop of yet another dangerous escalation in the trade war between the United States and China. In the latest round of retaliatory action by both superpowers, President Donald Trump has spooked world markets by pushing tariffs even higher on Chinese goods. He’s also taken the step of ordering American businesses, it seems, to look for alternatives other than China. The Prime Minister Scott Morrison, who is there as a guest leader, says the trade turmoil was raised during his talks with the US president.




Scott Morrison: The United States has raised a number of issues for some time now with China. Equally China’s raised some matters and it’s for both of those countries to sort these issues out and come to an agreement. And I’m always hopeful that they will be able to do that. And of course we’d like to see that happen sooner rather than later. It does have obviously a broader impact on the global economy.


[End of excerpt]


Hamish Macdonald: Scott Morrison speaking there from Biarritz in France. There are warnings the trade war could tip the world into recession.


This morning, Trade Minister Simon Birmingham joins us from Adelaide. Good morning to you.


Simon Birmingham: Good morning Hamish, good to be with you.


Hamish Macdonald: Scott Morrison has said that Australia will not be, in his words, a passive bystander when it comes to the trade war. So what was the PM’s message to President Trump overnight?


Simon Birmingham: Well Australia’s message is as it has always been through this, and that is that whilst we do understand some of the concerns the United States has with China and in fact share some of those concerns on some of the substantive issues like the need to ensure protection of intellectual property and the need to deal with issues around technology transfer, we also don’t like and don’t believe that unilateral tariff hikes are the way to achieve the best possible outcome. And that such measures are harming the global economy and that’s not good for anybody, and so we do continue to urge the two parties to engage in dialogue, to actually work through these issues, and to avoid the type of harm that is besetting the global economy at this time.


Hamish Macdonald: Are there specific opportunities though that Australia points to in its conversations with the US administration about where we might be able to move off the trajectory we’re on currently?


Simon Birmingham: Well Hamish, ultimately this dispute can only be resolved by the two parties themselves, by the United States and China, talking to one another. They’ve outlined demands of each other and we need to see them at the table working through these issues constructively and we, as I said, have been very clear, very consistent for a very long time in our approach to the issues. And ultimately though, you’re hearing that world leaders I think gathered at the G7 have a fairly consistent message. And our message is certainly not inconsistent with that of the G7 economies who are there with the United States, and it’s not a message that’s inconsistent with others such as our regional partners across the Asia-Pacific who would be saying the same things as we are to both the United States and to China.


Hamish Macdonald: Our Reserve Bank governor Philip Lowe is on the record as saying that he now considers the trade war to be the single biggest threat to the global economy. Do you agree with that analysis?


Simon Birmingham: Well look, I’ll leave expert economists to make those predictions. It is obviously …


Hamish Macdonald: Well you’re the Trade Minister, how big a threat is it to the global economy?


Simon Birmingham: Sure. Well it is a real threat. We’ve seen the evidence …


Hamish Macdonald: But not the biggest?


Simon Birmingham: Well Hamish, I’m not going to try to rank them. It is a real and genuine threat that is having an impact already. The growth in global trade volumes has slipped to its lowest level since the global financial crisis, and that’s had a flow on effect which has seen the IMF and the OECD and expert agencies writing down expectations in terms of the rate of growth in the global economy. And so it is not only a real threat, it is a reality we are dealing with now that these trade tensions are having a negative impact on global economic growth. And the longer they continue, the worse that impact will become. That’s why we do really urge the parties to find the way out of it and to try to resolve these issues.


Hamish Macdonald: If that fact does not shift the US president on- in terms of what the trajectory is that we’re now on, what will?


Simon Birmingham: Hamish, I can’t predict what will happen between the two parties [indistinct] …


Hamish Macdonald: Well that’s- that’s a pretty desperate situation to be in isn’t it? If the facts are so stark and you still don’t have a US president willing to observe those facts and act accordingly, that’s a pretty difficult situation for countries like Australia.


Simon Birmingham: It obviously takes the two parties to sit down and resolve these issues and to find a way to de-escalate the trade tensions that are having this negative impact on the global economy. In the meantime, what Australia seeks to do is get on with buttressing ourselves as best we possibly can to make sure that our trade relationships with all of our other trading partners, as well as with the United States and China in a bilateral sense, continue to be as strong as possible to make sure that our engagement economically around the world is one that facilitates growth where we can to be able to overcome some of the issues. And of course on the domestic front, to apply the type of tax cuts and infrastructure investment that our government is pursuing which can help to sustain economic growth here in the face of some of these real global tensions and impacts.  


Hamish Macdonald:     The Reserve Bank Governor Philip Lowe also lamented that he does not have a clear idea of the strategy being pursued by the US. Do you?


Simon Birmingham:     Well, I think it’s relatively clear what it is that the United States wants addressed. It’s a long list issues, and clearly, what we’ve seen to date is that President Trump is not yielding from any of those issues and continues to apply increasing pressure in the form of these increased tariffs …


Hamish Macdonald:     eBut with respect, Minister, that’s not a strategy. Do you know what the strategy is?


Simon Birmingham:     Well I think what he wants from this is reasonably clear. The point that we have made about our concern with the strategy or the tactics that are being applied is that they are having this negative impact on the economy and that unilateral tariff measures are of concern to Australia. And we’ve been very consistent in that for a long period of time.


Hamish Macdonald:     Donald Trump has issued this rather bizarre order to US companies to stop doing business with China. He’s threatened to invoke the Emergency Economic Powers Act, which would be akin to declaring a state of emergency according to some. What would be the effect on the global trading system if that happened?


Simon Birmingham:     Well the world has benefited immeasurably over the recent decades from opening up global trade, from deeper integration of investment flows, which has created strong economic growth, especially in our region. But that’s been a benefit right around the globe in lifting people out of poverty, and creating new opportunities for individuals. And measures that may step back from that, as these trade tensions do, are things that of course could have further negative repercussions for the global economy. So on all of these levels, whether it’s about the flow of goods in particular and the tariff implications there, or the flow of investment and the implications that come from and flow on from that in terms of economic growth. We again urge all parties to find ways that encourage that continued positive flow of trade and investment growth. That’s what Australia does in our policy settings. That’s why, just today, we have a hearing being undertaken into our trade agreements with Indonesia, with Hong Kong, which we want to see brought into force by the end of this year because they are about continuing to fuel that two-way growth in trade but also in investment.


Hamish Macdonald:     Australia, as you say, has a lot of exposure. There was a report last week that pointed to a short term $1 billion boom for Australian exports if China blocked agricultural imports from the US. But longer term, the impact on the Australian economy could be incredibly significant. I think KPMG last year said GDP could be cut by 0.3 of a per cent, cost of something like $36 billion. Are those the realities that you’re now operating within in terms of your forward planning, your thinking?


Simon Birmingham:     Well we operate with enormous uncertainty as to how long this could go on for and how much worse it could get. But also with the knowledge of the analysis, as I said before, that the IMF and OECD and others have done, which shows that it is already having a negative impact on global economic growth. Yes there are, depending on the goods affected by higher tariffs, potential short term opportunities that Australian businesses and farmers may be able to seize. But on the whole, our position has been to take that longer term perspective. It’s also been to recognise that as a government, we have to do all we can to buttress the economy. As Trade Minister, I do that by continually trying to expand our market access elsewhere. The Treasurer this morning at the Business Council of Australia giving an extensive speech outlining our priorities in terms of productivity, in terms of continuing $100 billion plus investment in infrastructure, and the impact that the tax reforms we’ve already legislated since the election are having and will continue to have to strengthen the Australian economy in the future in the face of these global tensions.


Hamish Macdonald:     You mentioned the Indonesia free trade agreement. It was signed back in March, it’s yet to be ratified by parliament. The Treaties Committee will hold public hearings this week. Labor has said it will take a wait and see approach to supporting the agreements. Do you anticipate any problems in getting it ratified?


Simon Birmingham:     Well, Hamish, I hope not. To be clear, there’s a process that involves the Treaties Committee and a certain number of days of Parliamentary sittings that must be met. So it could not have been ratified by now without breaching that process. So we’re following the proper process that sends it off the Joint Standing Committee on Treaties, and they’re undertaking hearings which commence this week. And this is a real opportunity for business groups, and I know the grain growers organisations, Meat and Livestock Australia, and many others have made submissions and are fronting up to those hearings, arguing for it to be ratified and come into force as quickly as possible because it will allow those Australian businesses to diversify their exports, to have new market opportunities, and critically, to be more deeply engaged in the case of Indonesia, with a very close, very large, and rapidly growing economy – currently the sixteenth largest in the world, but on some forecasts projected to grow to become the fourth largest economy in the world – and a country that is of huge strategic importance to Australia. So against the backdrop of all of those points, I would hope that the Labor Party make it clear as quickly as possible that they will allow entry into force of this trade agreement with Indonesia which is so critical to our economic positioning as well as to our regional and strategic architecture.


Hamish Macdonald:     Trade Minister Simon Birmingham, thank you.


Simon Birmingham:     Thank you, Hamish.