Interview with Tom Connell, Sky News

16 October 2020

TOM CONNELL: Well, cotton is the latest Australian product in China's firing line in escalating trade tensions between Beijing and Canberra. Mills in China are being told to stop buying Australian cotton as speculation mounts the industry will also be slapped with a tariff as high as 40 per cent. It comes after other tariffs and the suspension of beef imports from several abattoirs as well.

Joining me live now is Agriculture Minister, David Littleproud. Thanks very much for your time. What can you tell us about what you've been able to ascertain about what's happening with Australian cotton?

DAVID LITTLEPROUD: Yeah, thanks Tom. Look, we're seeking clarification, but effectively there is a quota of about 890,000 tonnes, and it's a first come first serve quota that we compete with other nations on. So, once it hits over that 890,000 dollar- tonne quota, it goes to a 40 per cent tariff. Now, we're trying to get an appreciation whether there has been a direction given to millers not to take Australian cotton - we would be very disappointed, and that would not be in the spirit of trade agreements that we put in place, and in which we all abide under the WTO on. So, we're obviously seeking clarification, and we will obviously make sure that we vigorously defend the cotton industry, and we're working collaboratively with them to make sure we get an appreciation and understanding of the circumstances in China at the moment.

TOM CONNELL: Right. So, part one of this, you're saying, is the maximum quota for Australian cotton under the free trade agreement has been reached, and its business as normal. Is that the case in terms of the quota? Because otherwise, why would the cotton industry be wondering what's happening here?

DAVID LITTLEPROUD: No, no, the 890,000 tonne quota is a competitive quota, it is one that countries compete on. Australia has filled that- portions of that in the past, but once you go over that, that quota, then effectively a tariff is imposed. So, if we are locked out of the first 890,000 tonne then effectively there is a 40 per cent quota placed on cotton that goes into China post above the 890,000 tonne. So, that's- effectively we're saying that we want to compete on a fair playing field.

TOM CONNELL: Right. So, what you know so far- this is Australia, from what you know so far, this is Australia being targeted then?

DAVID LITTLEPROUD: Well, that's what we're seeking clarification on. We would be very disappointed, and it wouldn't be in the spirit of trade agreements or the WTO - that's why we want to get clarification on this. And I think it's important that we get that to give comfort to Australian cotton producers, so that they understand that they're playing on a level playing field like all our export competitors. That's all we ask for, we're not asking for special treatment one way or another. We're just saying, give us a level playing field.

TOM CONNELL: Right.

DAVID LITTLEPROUD: But if you are going to single us out, then that would not be in the spirit of WTO arrangements.

TOM CONNELL: When you say: seeking to clarify - is this still the rather farcical situation that we supposedly have this strategic partnership with China, but you can't, for example, get a direct answer from your counterpart, nor can Simon Birmingham, in China?

DAVID LITTLEPROUD: Well, to have and to resolve issues you always need open communication, but you also need someone prepared to open up those lines of communication, and proudly Simon Birmingham and I have both done that to make sure that our hand is out. And the best way to resolve any differences or misunderstandings is to have dialogue. We're not afraid of that, we're prepared to have that dialogue with them, and that's why, again, we'll be seeking to get clarification around this point. It's important not to jump the gun, but I think it's important that we do get this clarification, considering the intelligence that's coming back through the industry to us about them being singled out by China.

TOM CONNELL: You say not jump the gun, but given what we've seen with barley, with beef, with wine, is it your natural conclusion right now that this is yet another salvo fired from Beijing over tensions with the relationship right now?

DAVID LITTLEPROUD: Well, this is where you've got to take the evidence and that's what we're trying to make sure we gather the evidence. I think that's the mature thing to do because, as you've just asked the previous question, you want to- we want to make sure that we can enrich our relationship and enrich that dialogue. And you need to do that with facts and evidence, and that's what we're saying to them, is let's have that conversation.

TOM CONNELL: Okay. But this is again just Australia singled out, and we get this same old line about water and in some way, various contributions to water in the Murray-Darling system means that this is subsidised cotton. That will just be code for: here's another jab on the nose, won't it?

DAVID LITTLEPROUD: No. Well, that- this is separate, Tom. This pertains to a quota, an international quota for cotton imports into China that we compete with other nations. It's got nothing to do with subsidisation ...

TOM CONNELL: But why is Australia being singled out?

DAVID LITTLEPROUD: Well, that's what we need to ascertain. I think that's the responsible action of a government, is to ask the questions on behalf of their industry in a way that is respectful, that we can continue to have a relationship with China that's mutually beneficial. And we will continue to try and have that dialogue at every opportunity with our Chinese counterparts. But this is an important aspect that needs to be clearly articulated by Chinese officials to us to give us that comfort because we've all signed up under WTO arrangements and we should all adhere to it. We're a fair nation, our cotton farmers are fair - all they are asking for is a level playing field.

TOM CONNELL: Just on the relationship, I know you've said you, Simon Birmingham are reaching out to try to get ministerial contact - it's not forthcoming at the moment. What's the highest level Chinese official that's actually talking to Australia?

DAVID LITTLEPROUD: Well, that's a question for the Foreign Minister, but obviously we continue to try and engage and we will. I think it's also important but to acknowledge that at a business to business level, the relationship continues on. And when you talk about beef, we hit our trade quota in June this year when normally we hit it by November, December of every year. So the demand for Australian product continues to increase from Chinese importers and business to business levels - I'm encouraged by that. But obviously, we'll continue to try and have that dialogue because that's the best way to resolve resolutions.

TOM CONNELL: Right. But that's all contained in the CCP. But just on that contact, I mean, surely this is a discussion ministers are having amongst each other? Surely, you know the highest level official that's actually returning calls, for want of a better description?

DAVID LITTLEPROUD: Well, I'm the Minister for Agriculture, so, with respect, my remit remains around agriculture, and I'll continue to reach out to my counterpart and let him understand that I'm always here - my phone is on and the door is always open. And then obviously the Foreign Minister will work through those other avenues, as is the case and as is the responsibility for the Foreign Minister.

TOM CONNELL: The most troubling part for a lot of our farmers is, even you as Minister, cotton is the next one here. We'll wait to see what happens. But you can't offer any assurance at all, can you, that other industries, one after the other, won't suffer similar blows?

DAVID LITTLEPROUD: Well, that's why we need to work through them one by one, but that's also why we've given them other options. And the cotton industry, in fact, has sent a lot of their product to Vietnam; now, Indonesia, where we've just ratified a free trade agreement in the last couple of months; and, India - as with other commodities. We've been able to send boats left and right because this Government has put in place trade agreements to be able to give our exporters the opportunity to spread their risk. That is a simple business principle that you should have - you shouldn't have market concentration, you shouldn't rely on it. And therefore, our responsibility as a Government was to give them other markets, and we've done that with over 14 free trade agreements.

So, this simply gives our exporters the opportunity to diversify in other markets. And in fact, cotton has done that in the past with those nations of India, Indonesia and Vietnam.

TOM CONNELL: But you can't offer assurances, though. And is that the issue that the China free trade deal, so lauded by the Coalition, has turned out to be a bit of a double-edged sword because it has built up, in effect, more of a reliance on China?

DAVID LITTLEPROUD: No. I'd have to say that's wrong, Tom, because as I just clearly articulated, even in the beef industry they've done their free trade quota and we're still going past it. China still has an appetite for Australian beef and that …

TOM CONNELL: But overall, I mean…

DAVID LITTLEPROUD: Let me say this, Tom…

TOM CONNELL: …our trading relationship with China increased, and initially that's a good thing. That's a good thing, but right now, we are more reliant on them.

DAVID LITTLEPROUD: But, that's not the- Tom, that's not the Government's decision, that's a commercial decision made by exporters. The Government doesn't tell our exporters where they should send their product to. Our job is to give them options to go into different markets. Now, if it's a commercial decision for exporters to concentrate into China, that's a commercial decision that they make and they bear the risk of market concentration. And we say to them- I learned in Grade 8 business economics not to have market concentration - there is risk to it. So what we are saying to exporters, we are providing you with an environment in which to explore other markets and spread your risk. That is what good business principles tells you, even at a basic level.

TOM CONNELL: Agriculture Minister, David Littleproud, I know it's been a busy morning. Thanks for fitting us in today.

DAVID LITTLEPROUD: Any time, mate. Thanks for having me.