WEEKEND BREAKFAST, ABC 24
SATURDAY, 14 JULY 2018
SUBJECT: China-US trade war, UK FTA, NATO, Live exports, ACCC report, By-elections.
JOHANNA NICHOLSON: The world's two biggest economies are locked in a trade war that has the potential to derail global economic growth. The US President, Donald Trump has personally threatened tariffs on $500 billion US worth of Chinese imports, if China dares retaliate again on previous U.S. announcements.
ANDREW GEOGHEGAN: So how exposed is Australia's economy to these global forces? Jason Clare is the Shadow Minister for Trade. He joins us now. Welcome.
JASON CLARE: Good morning.
GEOGHEGAN: So I guess we shouldn't be surprised. Donald Trump is following through on what he said he'd do. But are you surprised that this has gone on as far as it has with a potential to get worse of course?
CLARE: I'm worried about it. It's dangerous because the United States and China together make up about half the world's economy. So if they go to war on trade then the potential impact, not just for Australia but for the world is calamitous. It can lead to less trade which means fewer jobs.
At the moment that hasn't happened, but the Yanks have put tariffs on Chinese goods and the Chinese have retaliated. If that continues and there's tit for tat increase in tariffs then potentially for Australia it means our dollar drops, we export less to countries like China and that could mean that jobs are under threat here at home.
NICHOLSON: Should there be action taken from the Australian Government in this? Where does that leave Australia in terms of US and China – we do deals with both of them. Do we have to make a choice there. What do we do?
CLARE: I don't think it's about making a choice but it potentially involves picking up the phone and talking to both Washington and Beijing and saying ‘do a deal’. It's in the interests of America and China to do a deal here and sort this out. It's in our interest as well. So Australia like other countries should be saying to America and to China don't let this escalate into a full blown trade war, for the sake of the world, for the sake of your own economies sit down and work this out.
NICHOLSON: What's the likelihood of that we are listened to in that regard?
CLARE: I think it’s possible. Paul Keating always said always back self-interest, because you know it's trying. What all the economists say is it's in the interests of the U.S. economy and it's in the interest of the Chinese economy for this not to escalate out of control into a trade war. So hopefully sensible heads will prevail.
GEOGHEGAN: But as you say self-interest, that's certainly the case with Donald Trump. He's made no bones about it. It's all about America first. He wants to strike the best deal, that is the same with his negotiations with Britain post Brexit. Do you think that's likely to affect Australia's relationship – trading relationship with Britain? That there will be a deal struck there. Because of course Australia wants its own deal on the sidelines.
CLARE: That’s right. We could potentially strike the same deal. We won't know what Brexit looks like until March 29 when it all happens next year. But just like the Yanks, for Australia there is an opportunity for us to do a trade deal with the UK once it emerges out of the EU.
Britain is our fifth largest trading partner. We already do a lot of trade with the UK. And if we can do more, terrific. So the opportunity for a trade deal there is very exciting. It’s why the Government has said they want to do it. It's why the Americans have said they want to do a trade deal with the UK as well. But we won't know what the opportunity really is until Brexit happens, which is scheduled for March next year.
NICHOLSON: In regards to trade and also NATO. We've heard a lot about both of those in the last week. Does Donald Trump have a point in saying that the US is doing the heavy lifting here, and that other countries need to carry their own weight a bit more.
CLARE: Well he certainly made that point. He said that all of those countries that make up NATO should be spending two per cent of their GDP on defence. Australia has that target. It's a bipartisan target that both the Government of the Opposition are committed to. I understand out of NATO that those countries have made that commitment as well.
Those alliances are important for the countries of Europe but they're also important for America. One of the reasons that the United States has the power it has is that those alliances allow it to project power across the world. So I don't think, as some people have speculated over the week, that those alliances are under threat or that Donald Trump is about to pull out of NATO, or pull out of the alliance with Australia. Those alliances are important, but it's important that those countries understand where the other countries are coming from.
GEOGHEGAN: Let's move to a trade related issue of course with sheep, live sheep exports. Another license suspended. Do you feel as though it is only a matter of time before that trade is ended?
CLARE: Yes. I do.
GEOGHEGAN: How long? Because clearly the present Government is not keen on ending it. But do you feel as though perhaps they may make that choice?
CLARE: I don't know if the Government will, but there are Government members who think that we should. There’s a Private Member's Bill introduced by Sussan Ley that's in the Parliament now that says that we should phase out like sheep exports within five years. The Labor Party supports that. There's a lot of people in the Liberal Party who support that as well, so that could happen when Parliament returns in August. But I don't think the Government will allow that bill to be debated. That's unfortunate because I think most people watching, most people in Australia, would say that's what should happen.
We shouldn't be exporting sheep to the Middle East in the middle of the northern summer. We saw what happened last year, on that Four Corners story, what happens when you export sheep into the northern summer at this time of the year. We narrowly escaped that happening again this week when the Government finally decided to not provide an export permit to the same company using a different vessel to export 60,000 sheep. So good that hasn't happened, but we can stop this happening in the northern summer for good if the Government is willing to support that legislation in the Parliament.
We should be working collaboratively I think to phase this out over five years and set up our own processing industry in Australia, creating jobs here in Australia to process the sheep here and then export the meat overseas.
NICHOLSON: So do you see that change within the industry is not possible? The only answer here is a ban.
CLARE: I think the evidence from the veterinary associations, the evidence from a lot of people, is it's not possible to commercially put these sheep on a vessel, send them to the Middle East particularly in summer and both make sure that they're humanely looked after and for the companies to make a profit. So the best thing is stop exporting the sheep live and process them here in Australia.
GEOGHEGAN: Let's move to energy. We had the ACCC report midweek, essentially backing the NEG, but also saying power prices for retail users could fall potentially by 20 to 25 per cent. I would imagine a lot of people were very sceptical about that. Do you think that's realistic?
CLARE: I can understand why people are sceptical. The Government said power prices would drop by about $550 when they were elected. In fact they have gone up by up to $630 just in the last year.
People will know when you get a power bill it's hard to tell whether you're paying the right amount. Whether you're getting a good deal or not. It's easier to tell whether you're getting a good deal from a bank when it comes to a mortgage rate than it is from an electricity company.
One of the things this report recommended is that there should be a sort of default rate, and if you get a discount offer from an electricity company you've got a better idea understanding whether you're getting a good deal or not. At the moment you could potentially be offered a 20 per cent discount from your energy company, your next door neighbour gets offered only a 10 per cent discount, and they could end up paying less than you. What this report says is electricity companies are ripping us off. I think that's right and that's got to be fixed.
NICHOLSON: Did it also go some way to vindicating those who are pushing for coal to play a bigger role in the National Energy Guarantee?
CLARE: I don't think that's right. Certainly the people that are the flag wavers for coal fired power stations think that. But the report didn't say that. What it said is there’s a role for Government in underwriting the development of low cost energy generation. All the evidence coming in suggests that would support the development of gas fired power stations, or renewable energy that's backed up by batteries or backed up by pumped hydro. So that's what's most likely, I think to happen from that recommendation.
GEOGHEGAN: We're almost out of time, just before you go. Two weeks out from Super Saturday, you’ve got some crucial by-elections certainly Longman in Queensland, Braddon in Tasmania. How damaging have the comments of Mark Latham, your former leader been? Certainly as far as Longman is concerned where he has attacked Bill Shorten.
CLARE: It’s just a distraction. The bottom line is if you vote for One Nation in those by-elections you're voting for Malcolm Turnbull. Because One Nation is preferencing the Libs and that means if you're voting for One Nation you're voting for a $17 billion tax cut for the big banks and you're voting to increase the pension age to 70.
So if you're watching this and you live in those by-election areas and you're thinking of voting for One Nation, what you're effectively doing is voting to give the banks a tax cut and to force people to work until they're 70. I don't think many people would think that's a good idea.
GEOGHEGAN: Has he dissuaded people to vote Labour do you think?
CLARE: We'll have to wait and see.
GEOGHEGAN: Are you worried?
CLARE: Look, they’re tough. These are marginal seats where at any election it's only a handful of votes that will determine the outcome. So we've got to fight hard to win the support of the people of Longman. We've got to fight hard to win the support of the people of Braddon, and those other three seats that are in contest across the country.
NICHOLSON: Alright Jason Clare, we’ll have to leave it there.
CLARE: Thanks very much.
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