Identifier
Created
Classification
Origin
08CANBERRA886
2008-09-08 07:49:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Canberra
Cable title:  

AMBASSADOR MCCALLUM CALL ON INDUSTRY MINISTER CARR

Tags:  ECON ETRD ESTH EIND AS 
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UNCLAS SECTION 01 OF 02 CANBERRA 000886 

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TAGS: ECON ETRD ESTH EIND AS
SUBJECT: AMBASSADOR MCCALLUM CALL ON INDUSTRY MINISTER CARR

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TAGS: ECON ETRD ESTH EIND AS
SUBJECT: AMBASSADOR MCCALLUM CALL ON INDUSTRY MINISTER CARR


1. (SBU) Summary: Minister for Innovation, Industry, Science
and Research Kim Carr wants the Rudd government to set up a
10-year plan to address key innovation needs, which would
include funding of A$1.5 billion per year to improve research
training and infrastructure and changes to the tax treatment
of private sector research and development. The government
"white paper" on automotive manufacturing will be WTO
compliant and preserve planned tariff reductions, but will be
designed to "absolutely" preserve an automotive industry in
Australia. End Summary.


2. (SBU) In a brief but cordial courtesy call on September 4,
Ambassador McCallum, DCM Dan Clune, and econoff called on
Minister for Innovation, Industry, Science and Research Kim
Carr. Carr, a member of the Labor Party's left faction from
South Australia, is charged with overhauling Australia's
science and technology efforts, and reviewing the performance
and competitiveness of Australia's remaining manufacturing
sectors. His Department is in the process of drafting
government "White Paper" responses to both the National
Innovation Systems review they received last week, and the
Bracks Review of the automotive industry that was concluded
in August. A third review on textiles, clothing, and
footwear, is expected to be submitted to government in the
next few weeks. These White Papers will lay out preferred
policies to respond to the findings in each report.


3. (SBU) The Ambassador thanked Minister Carr for the strong
cooperation U.S. agencies have received from Australian
organizations, such as the Commonwealth Science and
Industrial Research Organisation, under his portfolio.
Noting that sustaining a culture of innovation has become a
subject of great interest in Washington, the Ambassador
sought Carr's views on the national innovation systems review
and other government efforts to foster and sustain Australian
industries.

Innovation Review
--------------


4. (SBU) On innovation systems, Carr said that the government
would release the review's findings "shortly" but that he
expected it to serve as the foundation for a ten-year
government plan to completely overhaul and strengthen

Australia's research and development structures. The process
has been heavily influenced by the Rising Above the Gathering
Storm report (chaired by former Lockheed Martin CEO Norm
Augustine, who visited Australia in May) in the U.S. and its
counterpart in the UK. Carr said he expected that Australia
would follow similar paths, although he noted Australia would
be looking to provide government funding to undertake the
needed reforms, unlike the U.S. Congress. The public
research sector in Australia was in need of serious help,
Carr said, and the government would need to provide about
A$1.5 billion a year for ten years to improve research
training and infrastructure. He noted that the PRC was
doubling R&D expenditures "every few" years and that others
in the region were close to that.
Australia's R&D spending had fallen to 1.8 percent of GDP,
and that was "not satisfactory" to the Rudd government. Carr
also said he felt the government side was the "easy part" as
there was little resistance across the Parliament to spending
more on R&D.


5. (SBU) On the commercial side, he said the government would
have to significantly alter the tax structure affecting
commercial R&D, and replace the Howard government's
multi-billion dollar Commercial Ready joint funding program
Qmulti-billion dollar Commercial Ready joint funding program
with something similar but more effective. Internationally,
Australia would look to step up bilateral and regional
collaboration, and leverage flagship programs like the Square
Kilometer Array (SKA),where Australia is one of two
competitor sites. Australia would look at opening up its
high-level training systems, to provide greater access and
mobility to senior researchers from abroad. Such openness,
Carr said, was critical to attracting and maintaining top
research talent, and would not threaten Australia's
competitiveness.

Carr on Cars
--------------


6. (SBU) Turning to the automotive report, Carr said that the
findings indicated that U.S. manufacturers in Australia were
doing better than their parents in the U.S. GM's local
subsidiary Holden was doing very well in Australia, Carr
said, and the government would push to expand that success.

CANBERRA 00000886 002 OF 002


Holden's leadership was "top notch" and enjoyed a very good
relationship with Canberra. Ford, Carr said, had serious but
not fatal problems in Australia, and had not been helped by
the departure of senior leaders who had been getting a handle
on the challenges faced in Australia. Carr said the problems
facing Australian manufacturers were "extraordinarily"
similar to those faced in the U.S., and attributable to high
petrol prices, lack of credit, and a lack of alternatives to
what had seemed like economic winners just a few years ago.
He said the model pursued by the Big Three in the U.S. had
worked for forty years, but the statistics on falling sales
and reduced driving miles in the U.S. were staggering. The
government was working very closely with industry on these
issues, Carr said, and the upcoming white paper should be
seen as a "strong blueprint" for future policies. The
government's response, Carr emphasized, will be WTO compliant
but will absolutely preserve an automotive manufacturing
industry in Australia. (Note: Despite calls by many
including Steve Bracks to delay the planned reduction in auto
tariffs, Prime Minister Rudd has said the tariff cuts will
take place as planned.) Carr confirmed that Holden will soon
begin manufacturing a hybrid vehicle in Australia, and that
Toyota had done very well and would expand on its hybrid
engine and manufacturing facilities in Victoria announced
earlier this year.


7. (SBU) Comment: Carr seemed at ease with the policy
complications of reforming both the auto industry and
innovation systems. Although his approach to preserving the
automotive industry in Australia smacks of European-style
industrial policy, he seems committed to WTO-consistent and
market-based policies. End Comment.

MCCALLUM