PM to Raise Container Security Initiative with President?

UNCLAS SECTION 01 OF 02 MELBOURNE 000011 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EIND ECON ETRD AS SUBJECT: PM to Raise Container Security Initiative with President? MELBOURNE 00000011 001.2 OF 002 Ref: Summary -------------- ¶1. (SBU) According to Port Melbourne's CEO Stephen Bradford, Prime Minister Rudd may raise the logistics of DHS' Container Security Initiative with the President during their early interactions. Melbourne is Australia's busiest port and has seen a clear drop in container traffic since November. Bradford expects a deeper decline in January as the lunar New Year holiday compounds slowing growth in China, Australia's primary export destination. Bradford was optimistic, however, that container traffic would pick up again after the "crisis of confidence" passes. End Summary. Container Security Initiative -------------- ¶2. (SBU) Melbourne Port Corporation CEO Stephen Bradford told post on January 22 that he was somewhat apprehensive about U.S. legislation requiring selected containers to be x-rayed prior to entering the United States and believes that Prime Minister Rudd may bring concerns about this initiative to the attention of the President during their early interactions. (Comment: We believe Bradford was referring to DHS' Container Security Initiative - CSI - which has not yet been fully implemented in Australia. End comment.) ¶3. (SBU) Bradford made reference to a 2011-2012 mandatory implementation date for ports around the world, including Melbourne and stated that he was uncertain whether screening would take place in Australia or in the United States. He went on to say that any costs generated by the screening process would inevitably be passed on to downstream consumers. Traffic Slows in Melbourne's Port -------------- ¶4. (SBU) Melbourne's port, which handles approximately 36 percent of Australia's trade, has seen reduced container traffic since November. According to Bradford, growth in the number of containers handled by the Port of Melbourne has hovered around 8.5 percent annually. He expects this to drop off to 4.5 percent this fiscal year, which ends in June. Automobile imports have fallen off by approximately one-third since October. Bradford remained optimistic, however, and believes that growth will pick up again within two or three months once the "crisis in consumer confidence" sputters out. ¶5. (SBU) Exports to the United States have remained steadily at 16 percent of Melbourne's port traffic over the years and are comprised of consumables such as meat, wine and vegetables. Bradford noted that he has not noticed a significant rise in the volume of exports to the United States since the free trade agreement was signed in ¶2004. (Comment: The U.S. share of Australia's overall exports has declined since 2004. Given that exports to the United States have remained at 16 percent of Port Melbourne's total, the city's relative share of U.S. exports vis-a-vis other Australian ports has almost certainly increased since 2004. End comment.) China -------------- ¶6. (SBU) China is Port Melbourne's largest export destination. Butter, cheese and other consumables make up the bulk of these exports; ore is exported primarily from Western Australian ports. Bradford expects a sharp decline in January exports due to the traditionally slow Chinese New Year period. He has heard from many sources that Chinese companies are planning on extending the New Year holiday for up to three weeks in order to avoid cutting back staff as Chinese growth slows. ¶7. (SBU) Bradford, who worked for an iron ore company for several years, does not believe that Australian mining firms will capitulate to Chinese demands to re-price ore contracts quarterly. He said that this would create too much uncertainty for mining companies to make capital investment and other long-term business decisions. While he believes that 2009 iron ore contract prices will be significantly lower than last year's prices, he stated that mining companies will not agree to re-price the contracts to the January 1, 2009 effective date that Chinese firms are pushing for. Comment -------------- MELBOURNE 00000011 002.2 OF 002 ¶8. (SBU) While Bradford does not speak for the Australian government on the issue of the Container Security Initiative, he is the chief of Australia's busiest port and no doubt wields influence on Australian maritime trade policy. He did not oppose the initiative, but rather expressed concern over the logistics of its implementation and eventual costs. Bradford was somber in his assessment of the global slowdown's impact on the volume of traffic passing through his port, but was optimistic that container traffic would pick up again by April. Post believes Bradford's expectation of a quick recovery in consumer confidence to be overly optimistic. THURSTON