Interview with Carrington Clarke – ABC 24 The Business – Friday, 8 June 2018

FRIDAY, 8 JUNE 2018 

SUBJECTS: US tariffs, Trade Wars, Australian wine exports to China, Australia-China relations.

CARRINGTON CLARKE: Jason Clare, thank you for joining The Business.

JASON CLARE: Thanks for having me.

CLARKE: How concerning is this dispute between America and who are supposed to be its best allies?

CLARE: I think when any country whacks tariffs on another country and then that country retaliates and puts up their own tariffs, that’s a worry. That’s going to lead to fewer jobs and less growth.

The lesson from Australia over the last 25 years or so, the lesson from Bob Hawke and Paul Keating is that if you want to create more jobs, and more companies, and more exports then you cut tariffs, you don’t increase them. So whenever you see what’s happening today we should be worried.

CLARKE: We’re allies with almost – well with all of the parties concerned. At some point Australia might need to make a choice on who to go with on some of these issues. Which side would Labor choose?

CLARE: Well I think we should always argue for freer markets and lower tariffs. One of the side effects of this for Australia could be that steel that was otherwise going to be exported to the United States could get dumped here in Australia at below cost price. That’s a real risk and the Dumping Commission has said as much. That’s why I’ve argued that we need to be ready for that. With extra resources for the Dumping Commissioner and extra penalties for companies that do that. That’s one of the risks here and we need to be ready for it.

CLARKE: Are you scared though that Australia has been given a free pass so far, but is there a risk that Donald Trump will turn his attention to Australia.

CLARE: Well the President’s argument is that America has a trade surplus with Australia, and that is certainly the case. America doesn’t have a trade surplus with many of these other countries. So I wouldn’t expect that.

One of the points that I’d mention and I’d give the government a pat on the back for, is they did a lot of hard work in making the case to the American Government that these tariffs shouldn’t apply to Australia. The business community did a good job of that as well. It shows that we’ve got good strong relationships with our American counterparts.

Now I make that point because compare that to the problem we’ve got with Chinese exports at the moment, where we haven’t been able to pick up the phone and talk to the Chinese leadership and sort that sort of issue out. We have it with America but we don’t have it with our biggest trading partner China.

CLARKE: I want to turn to China in a moment, but on the issue of Donald Trump’s view of trade, he does seem to see it is a win loss equation, surpluses are good deficit is bad. Do you think he misunderstands trade and is that worrying when Australia’s trying to do deals with him?

CLARE: Well the more we trade the more everybody wins.

CLARKE: Do you think Donald Trump gets that though?

CLARE: I think he’s got a different view. He’s got a different view to the EU. He’s got a different view to the Australian Government. He’s got a different view to me on that. It’ll be interesting to see what this conversation looks like at the G7. But I think we need to continue to make the case as best we can for open and freer markets. In our own region I’d like to see one day – and I know this is not going to happen tomorrow – but I’d like to see a free trade agreement here in our region that includes the United States and includes China. These two big superpowers. If we can get them together in an agreement with Australia and the rest of Asia that will help to lay the foundation stones for growth in our region right through this century.

CLARKE: When the Reserve Bank Governor was talking about trade earlier this year he said the best thing to do is to not retaliate. Now obviously that’s politically very difficult. If Australia gets into a situation where we’re being hit with tariffs – increased protections – what will be Labor’s position? Is it to do nothing as the Reserve Bank Governor suggests, or would you fight back?

CLARE: Well I don’t think we should be retaliating, but I don’t think the Government thinks that either. What’s interesting about what’s happening at the moment is that Europe is threatening to retaliate by putting tariffs on goods from some of the key swing states in the United States. Places that voted for President Trump at the last election. Mexico’s threatening to do the same. They’ve said they’ll put tariffs on pork. America exports more pork to Mexico than anywhere else in the world. And where does most of that pork come from? Places like Iowa.

Now this happened before – back in 2003, I think. George W. Bush put tariffs on steel. The EU retaliated by putting tariffs on certain goods that came out of important Republican states in America. Including orange juice that came out of Florida, where his brother Jeb Bush was the Governor. George Bush complained at the time that Europe was picking on his family. Within a couple of months they pulled those tariffs off steel.

It’ll be interesting to see – I know this is not 2003 – it’ll be interesting to see if Europe does the same thing. If Mexico does the same thing and try and hit the President where it hurts in those swing states, in the lead up to the mid-term elections, how long those tariffs will last.

CLARKE: So you think in that case it actually is beneficial for countries to look at a tit for tat response because it can have political repercussions?

CLARE: Well in that case it led to America pulling those tariffs off steel.

CLARKE: So you think sometimes it is helpful to actually go for a political response?

CLARE: Well in the short term what it meant was higher tariffs, fewer jobs, less economic growth. So I discourage all countries of the world from going down the path that we saw back in the 1930s, that led to some very awful consequences. But politics sometimes plays a part here and I wouldn’t be surprised if we see the EU do what they did 15 years ago.

CLARKE: Let’s turn to Australia’s relationship with China. There has been criticism from your side that the Government has mishandled that relationship. Is it your understanding that China is using trade barriers to send a message to Australia that they’re not happy?

CLARE: In short, yes. That’s what Australian companies are telling me. It used to take two weeks for Australian wine once it hit the docks in Shanghai to get to a restaurant or to get to someone’s dining room table. Now it takes two months and the reason for that is because of some of the things the Government has said in the last few months.

In particular what the Prime Minister said in December when he was talking about foreign interference laws – that don’t apply to any particular country. He targeted China. He spat the words of Mao Zedong back at the Chinese. He said that just as the Chinese had stood up in 1949, he said these laws were Australia standing up today. The Chinese noticed that and they said at that time that it was poisoning – or poisoned – the relationship between Australia and China, and now they’re retaliating.

CLARKE: But are you suggesting Australia shouldn’t speak freely? If that’s the advice from the intelligence community that China is the biggest risk isn’t it right the Government speak freely about that issue without the repercussions of a trade war?

CLARE: All I’m saying is that Australian Prime Ministers shouldn’t say silly and stupid things. We shouldn’t pander to China. We always must stand up for our national interest and that’s what this legislation is all about. We have to act in a professional and a respectful way with all of our trading partners. But you can avoid saying provocative, stupid things that are going to lead to this sort of retaliation. That’s my criticism of the Government here and it’s not just wine, it’s beef as well. We signed an agreement with the Chinese back in March last year to export chilled beef to China. Now 14 months on or so and it still hasn’t happened, and according to beef exporters the reason is the same.

CLARKE: We know that in recent times China has pressured QANTAS to change how it identifies Taiwan and we know that there are other issues that they’re sensitive about. But aren’t we giving up our ability to speak fearlessly about issues of national interest because of potential economic consequences?

CLARE: The short answer to that is no. We should always be able to speak freely. But what we shouldn’t do is speak in a way which is just plain dumb and which is just going to provoke a response from our major trading partner unnecessarily. China is our biggest trading partner. One in every three dollars we make from exports we make from China. As China grows that relationship is only going to become more important. Now a key part of that is making sure that we can deal with problems which inevitably will emerge in a professional and respectful way. We don’t need to pander to China. We should avoid what’s happened at the moment which is a problem created by an Australian Government, an Australian Prime Minister, frankly just saying something that was downright stupid that’s prompted our major trading partner to get angry and then start hurting Australian exporters.

CLARKE: It does seem that China is not playing by the rules that have been around trade for a long time in the western sphere though. They’re using political differences as a reason to take economic consequences. I’m interested about where your line in the sand is. What Labor’s line in the sand will be about talking about some of these contentious issues whether it be Taiwan or Tibet or human rights. When you say you’re not going to say stupid things what limit on the ability for Australian ministers to speak freely is there?

CLARE: As I say there’s always going to be issues where we have differences of opinion. The South China Sea is a good example of that. Both parties here have a different position to the Chinese on this issue. But you can do that in a professional way, in a courteous way. You can make your points very clear to the Chinese. In public and in private. Without saying things which are going to provoke an unnecessary response.

CLARKE: China has shown its willingness when it comes to South Korea on non-tourism visas, or Japan when it comes to rare earth to take economic steps when they’re not happy with a certain political issue. Don’t you run the risk by censoring, trying to stay away from contentious issues that you’re eventually going to end up in a situation where they’re able to muscle us on these issues?

CLARE: Carrington, I’m not saying keep away from those sensitive issues, just deal with them properly and professionally. You know this is a big issue, the foreign interference legislation, is a big issue. It doesn’t target any particular country. The problem here is the Government said that it did. That’s what has created this problem.

CLARKE: It is clear though the intelligence agencies do believe China is the country – I mean the most high profile recent cases, including the Labor Party are Chinese linked business people trying to…

CLARE: The legislation applies to any country in the world. You just have to look at what’s happening in the United States and the investigations underway there to know that this could potentially be an issue with many different countries. So by targeting one country – our major trading partner – you get the result that we’ve got. Which is just unnecessary and the way to fix it – you know we are where we are, what we do now – the way to fix it is the Prime Minister should pick up the phone or get on a plane and sit down with the Chinese leader and sort this out. John Howard did the same thing in 1996. There was a problem over Taiwan, he talked to the Chinese leaders and sorted it out. He was in the newspaper last week saying that that’s exactly what the Prime Minister should do.

CLARKE: Even Kevin Rudd, well known mandarin speaker had his own run ins with China when he was in the prime ministership. Very high profile fights with them which had consequences. Isn’t it recognition that you’re going to have conflict with China. So by putting any sort of caveats or disclaimers before you say things to them just ends up putting you into a more difficult situation.

CLARE: I’m not saying put caveats there, I’m just saying don’t act in a stupid way. Sure there’s going to be problems. There’s been problems in the past there’ll be challenges in the future. It’s just incumbent upon all of us: politicians, journalists, business people to act in a professional way. Think before you speak.

CLARKE: Jason Clare we’ll leave it there. Thanks for your time.

CLARE: Thanks Carrington.


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Authorised by Noah Carroll ALP Canberra