BUSINESS LEADERS STILL WORRIED ABOUT U.S. PROTECTIONISM

C O N F I D E N T I A L MELBOURNE 000047


NOFORN
SIPDIS

E.O. 12958: DECL: 04/14/2019
TAGS: EFIN ECON ETRD AS
SUBJECT: BUSINESS LEADERS STILL WORRIED ABOUT U.S. PROTECTIONISM

REF: A. CANBERRA 357

B. CANBERRA 327

C. CANBERRA 203

D. MELBOURNE 37

Classified By: Justin Kolbeck, Pol/Econ Officer for reasons 1.4 (b),(d)

Summary
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1. (C/NF) Melbourne based business leaders are worried that
global economic conditions are still ripe for protectionist
policies in the guise of stimulus packages. During a
luncheon at Consul General's residence, business leaders
asked if the U.S. Congress would backtrack on free trade.
They hailed the U.S./Australia FTA, but noted that tax
harmonization would help take the bilateral relationship
further. A united voice vis-a-vis China will be critical for
jointly confronting climate change. Oz Mineral's CEO asked
whether the United States had influenced the recent GOA
decision to block Chinese acquisition of his company. A
Telstra executive said that his company is ready to play ball
with the GOA's recently announced nationalized broadband
plan. End Summary.

Worried About Protectionism
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2. (C/NF) During an April 8 luncheon, Anthony Byrne, federal
Member of Parliament and Parliamentary Secretary to the Prime
Minister and for Trade told Consul General and visiting
Econcouns that he was happy with the G20 communique, but
worried that some countries may try to pursue protectionist
policies via domestic stimulus packages. He said that such
behavior risks igniting an "indirect trade war." Byrne and
Oz Minerals CEO Andrew Michelmore complained about high
European non-tariff barriers; Byrne noted that some
Australians are beginning to wonder why the GOA is not moving
to protect its economy by raising trade barriers. Michelmore
went on to say that bilateral trade agreements can cause more
harm than good and alleged that U.S. agreements with the E.U.
on steel and beef have caused "collateral damage in the
Australian economy." The Australians were taken aback when
it was suggested that their own country might be able to take
some steps of its own to lower trade barriers.


3. (C/NF) Byrne, Michelmore and David Moffatt, Telstra's
Group Managing Director of Consumer Marketing and Channels
all expressed concern over the possibility of U.S.
protectionism and the U.S. Congress' orientation on trade.
Byrne acknowledged the President's early action to make the
"Buy American" provision in our stimulus package consistent
with WTO obligations, but asked whether the provision was an
indicator of future protectionist moves out of Congress.
They argued that the symbolic importance of the United States
is such that we must be seen to be moving forward to advance
freer trade or else many countries will think that they have
cover to move backward. Econcouns stressed that the United
States has made clear our commitment to trade and our
opposition to protectionism, while noting that it is
reasonable to give the new team the opportunity to lay out
our policy.


4. (C) Michelmore described Europe's emissions trading scheme
(ETS) as a trade barrier. Mark Paton, Westpac's State
General Manager for Retail and Business Banking echoed these
concerns and said that complying with an ETS based on 1990
levels disadvantages Australia vis-a-vis Europe. Monash
University's Vice Chancellor, Richard Larkins noted that the
President's attitude on climate change will be incredibly
important and all of the attendees agreed that Australia and
the United States must speak with one voice to China on
climate change.

Ways Forward
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5. (C) Participants in the luncheon said that there are not
any major impediments in the U.S./Australia relationship.
Michelmore noted, however, that tax harmonization between the
two countries would help with professional relocations. He
explained that differences in personal tax regimes and the
impact on retirement funds had caused several Oz Minerals
transferees between the U.S. and Australia to back out of
their agreements once the full tax implications had been
explained. Michelmore also praised the 2008 open skies
agreement as a way to confront the tyranny of distance
between the U.S. and Australia but argued that the impact on
business is likely to be minimal. Telstra's Moffatt said
teleconferences and other technology have reduced the need
for much business travel; all agreed that lower airfares
would primarily benefit the important tourism industry.

Interference in Oz Minerals?
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6. (C/NF) Michelmore asked bluntly why the United States had
influenced the GOA to block a bid by Chinese state-owned
Minmetals to purchase Oz Minerals on security grounds (ref.
B). He said that he could understand the GOA's rejection of
an outright sale, but said that blocking a partial sale or
even investment in individual projects demonstrated
"paranoia." Econcouns explained that the Embassy had neither
been asked for nor offered an opinion by Australia and that
we have confidence in Australia's ability to determine its
own security interests. Byrne said that intelligence sharing
between the United States and Australia is strong and that
there is "no divergence" in our views on China. Byrne
offered to raise the issue with Prime Minister Rudd if
Michelmore was still unsatisfied.

Telstra Ready to Play Ball
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7. (C/NF) Referencing the GOA's April 8 announcement that it
would build the national broadband network (ref. A),Moffatt
said that he was "surprised," but that the company is looking
for ways to move forward and cooperate with the government.
He said that the personality of the company's new CEO would
play a large role in the future relationship between Telstra
and the GOA. (Comment: Local observers have criticized
former CEO Solomon Trujillo for waging a costly and
unnecessary war with the GOA over details on the broadband
network. End comment.) Moffatt did wonder, however whether
the A$43 billion (US$30 billion) would be better spent on
other projects given Australia's relatively high
connectivity. Byrne responded by saying that the GOA will
continue to inject funds into the Australian economy until
"private companies feel better about investing."

Comment
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8. (C/NF) The participants hailed the U.S./Australia FTA as a
success and had only small modifications to suggest such as
tax regime harmonization. They all shared a real concern,
however, that global economic conditions are still ripe for a
rise in protectionism. While Anthony Byrne's trade portfolio
is almost symbolic -- Trade Minister Simon Crean dominates
the subject -- his worries about protectionism disguised in
stimulus packages and "prohibitive" tariffs in Europe were
real and were shared by these representatives of the business
community.

THURSTON