R 140106Z APR 09
FM AMCONSUL MELBOURNE
TO SECSTATE WASHDC 4918
INFO AMEMBASSY CANBERRA 
AMCONSUL PERTH 
AMCONSUL SYDNEY 
WHITE HOUSE WASHINGTON DC
DEPT OF TREASURY WASHDC
DEPT OF COMMERCE WASHDC
JOINT STAFF WASHDC
NSC WASHINGTON DC

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 
------- 
 
¶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 
--------------------------- 
 
¶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 
------------ 
 
¶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? 
---------------------------- 
 
¶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 
-------------------------- 
 
¶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 
------- 
 
¶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