CNBC Squawk Box Asia

28 August 2023


Sri Jegarajah, Host: Australia has done remarkably well in weathering a trade scrap with China over the last three years. Things are now improving with Aussie coal and barley back in China. But there’s still lobsters, beef and Australian wine, which is taxed at 200 per cent entering China. Talks between the two sides continued at the G20 Trade Ministers’ Meeting in Jaipur on Friday. CNBC’s Martin Soong, my colleague, is live in Delhi, the capital, with the latest. Good morning, sir.

Martin Soong, Host: Good morning Sri, good morning folks. That’s right, Australia’s Assistant Trade Minister Tim Ayres was down in Jaipur – it’s about 300km south west of where we are here in the Indian capital of Delhi – just on Friday for talks on those remaining issues, the sticking points there. We asked him whether enough progress has been made to set up a visit by Australian Prime Minister Anthony Albanese to Beijing by the end of this year.

Tim Ayres, Assistant Trade Minister and Assistant Manufacturing Minister: I had a very good and direct exchange with Wang Shouwen, the Chinese Vice Minister for Trade. It was a very useful discussion and opportunity to exchange views. I’ve met with Minister Wang Shouwen a number of times over the course of this year. And, as Prime Minister Albanese has said, while there are challenges that are there in this relationship, it is absolutely in the interests of the region and in the interests of stabilising the bilateral relationship that at a ministerial level and a leader level we engage in as much dialogue as possible, and I’m determined to continue that approach and Trade Minister Don Farrell has continued that approach as well.

Martin Soong: Okay. So, for our constituency at CNBC, businessmen, investors et cetera, one of the key things they’re interested in is, of course, your enormous relationship - trade relationship with China – obviously, right? Things have improved, I think it would be fair to say. Your barley is in now. Coal was in before that. Still a couple of items left though, right, to talk about. You’ve got your lobsters, you’ve got your wine, you’ve got your beef et cetera. How are those talks progressing? The tax on Australian wine is about 200 per cent. That is – that’s not useful.

Assistant Minister: I want to see more progress on the remaining impediments to Australian trade into China. It is not in the interests, of course, of Australian exporters or Chinese consumers. It is certainly not in the interests of Chinese business for these impediments to continue to be placed in front of a range of imports into China, but it’s also what business needs to see is confidence in the rules-based approach to trade. And the meeting I had was an opportunity to underscore the requirement for further progress.

I am, of course, pleased to see that we’ve moved our way, in a careful and methodical approach, to dealing with the areas where trade impediments are being removed. That is a good outcome. But I want to see, and the Australian Government wants to see, trade with China return to normal and to be stabilised across the board; and until we’ve removed all of those impediments, it’s not possible to say that trade is back to normal.

Of course, one of the ironies of this situation is that, of course, Australia–China trade has expanded over the course of the last few years and I was pleased to be able to canvass that with Wang Shouwen and to set out Australia’s approach to resolving the remaining differences.

Martin Soong: Yeah. I’m not sure if I’m going to get a straight answer from you on this one, but I have to try.

Assistant Minister: Of course.

Martin Soong: The remaining items to be talked about, which we went through just a few seconds ago, are those going to have to be resolved or is entry going to have to be guaranteed by China on those items before your Prime Minister Albanese visits Beijing? There’s talk of him perhaps sometime before the end of it year.

Assistant Minister: I would like to see progress. The progress that we made on barley was, of course, a WTO dispute that sat behind that and it underscores the importance of the WTO to all of the WTO nations – and also to China and Australia – that that sat against the backdrop of the then discussions to resolve the questions around barley. From the Australian Government’s perspective, we think that the same approach should be taken in terms of our wine sector. There is an existing WTO dispute. I would like to see bilateral discussions on wine to resolve and to remove those impediments. As you say, very significant tariffs unilaterally applied on Australian wine – and I would like to see more progress over the course of the next few months on those issues.

Martin Soong: All right. We can get back to China in just a bit, but let’s pivot over to trade relations with the EU. Your Minister, Mr Farrell, has been on the record saying, “Look, one of the big problems is – and this I think encapsulates it is - for Europeans to enjoy an Australian steak, they’re lucky if they can have one once every 40 years”, and that is simply not acceptable, right? The tonnage had been, originally, I think, a little bit over 3,000 tonnes a year. The offer on the table went up to almost 10 times that. That is still not acceptable for Australia. What is – what would be a fair level of tonnage for beef?

Assistant Minister: Well, I’m not going to telegraph in this interview the precise shape of the negotiation strategy for the Australian team in the Australia–EU negotiations, suffice to say what Australia needs to see to resolve what will be an agreement that is manifestly in the interests of both the European Union and Australia is a fair and reasonable offer on market access for a range of agricultural products, particularly meat and sugar. There needs to be an improvement.

The Jaipur G20 meeting was an opportunity for me to underscore that with my friends from the European Union and to canvass some of the issues in terms of the substance and the process for how we approach upcoming discussions. I’m very pleased with the progress that’s been made so far in those negotiations, but as Don Farrell made very clear in Brussels, we need to see improvements in the EU’s offer around market access for agriculture.

You’re right to say the Australian farming community, who use European pharmaceuticals, who utilise at an enormous rate European agricultural technology on their farms, tariff‑free access into Australia, they see a fairness question here. They see a question of fair treatment in terms of market access to Europe. Now, of course, these agriculture questions are always controversial in trade negotiations, but I’m optimistic that we can work our way through these issues and get a fair deal for Australian farmers.

Martin Soong: Okay, Minister, if we could take a step back, pull back, and take a much broader look at trade with regards to Australia. It’s been obviously a – theoretically should have been a tough two or three years. Your previous government obviously initiated or pushed for an investigation or probe into the origins of the coronavirus, COVID‑19, et cetera. China obviously didn’t like that and suddenly, boom, boom, boom, a whole bunch of Australian exports got taken off, right? Interestingly, though, when you take a look at some of the trade statistics, Australia has actually weathered the last two or three years very well, in terms of trade diversion. If I’m not mistaken, I think Japan took up the slack very much so, followed by many of the other countries here in Asia.

But now that China has reopened and tensions seem to be easing somewhat or relations seem to have improved somewhat between Australia and China, trade flows are reverting back to normal. I think the peak was 43 per cent of your exports went to China. It’s back up in the mid-thirties, right, so it’s going in the direction where it was before this whole COVID-19 probe happened. But one of the big switches that people are noticing is with regards to what Australia sends to China is: it is not LNG which is the top export now; it is lithium. China takes almost all of Australia’s lithium. So, if you’re in that business, good for you. But the problem is it seems to run counter to the government’s recently released strategy on critical minerals, which says, “Look, no, you don’t want all your eggs in one basket in terms of customers.” How do you square the trade flows and this critical minerals report?

Assistant Minister: Well, the first thing to say is that trade flows are a function, of course, not just of what governments do but what is happening in international markets and commodity prices as they evolve over time.

In terms of the diversification task that is in front of the Australian Government, we see that in two prisms. Firstly, of course, in terms of market diversification. As your viewers will know, Australia is pursuing a second phase comprehensive trade agreement with India. We’re pursuing a trade agreement with the European Union. We are working hard to establish markets all over the world, including increased cooperation with the United States over critical minerals and new energy opportunities as the world goes through this enormous energy transition. So, the first aspect of our diversification approach is around market diversity.

But, of course, the second aspect has to be around product diversification. The Albanese Government wants to see Australia offering more products to the world in areas like lithium and the other critical minerals areas. We have enormous resources in Australia, of critical minerals, but almost unlimited sun and wind. In terms of our solar and renewable energy capacity in wind, we have enormous opportunities for an industrial transformation in Australia, and the pipeline of potential investments is very large and very healthy and we are looking forward to engaging with economies around the world and with investors around the world looking to invest in Australia for the renewable energy investments of the future and the critical minerals investments of the future. More on-site production in Australia, contributing at a higher value level into global supply chains, that’s where the big opportunities are that we want to share with the economies of the world.