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COMMONWEALTH OF AUSTRALIA

Official Committee Hansard

SENATE FOREIGN AFFAIRS, DEFENCE AND TRADE REFERENCES

COMMITTEE

Reference: Australia’s relationship with China

MONDAY, 20 JUNE 2005

CANBERRA

BY AUTHORITY OF THE SENATE

INTERNET

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SENATE

FOREIGN AFFAIRS, DEFENCE AND TRADE REFERENCES COMMITTEE

Monday, 20 June 2005

Members: Senator Hutchins (Chair), Senator Sandy Macdonald (Deputy Chair), Senators Hogg, Johnston, Mackay and Ridgeway

Participating members: Senators Abetz, Bartlett, Boswell, Brandis, Brown, George Campbell, Carr, Chap-man, Colbeck, Collins, Conroy, Coonan, Crossin, Denman, Eggleston, Chris Evans, Faulkner, Ferguson, Fer-ris, Fifield, Forshaw, Harradine, Kirk, Knowles, Lightfoot, Ludwig, Mackay, Mason, McGauran, Nettle, Payne, Robert Ray, Santoro, Stott Despoja, Tchen and Watson

Senators in attendance: Senators Hutchins and Sandy Macdonald

Terms of reference for the inquiry:

To inquire into and report on:

(a) Australia’s economic relationship with China with particular reference to:

i. Economic developments in China over the last decade and their implications for Australia and the East Asian region;

ii Recent trends in trade between Australia and China;

iii. The Australia-China Trade and Economic Framework and possibility of a free trade agreement with China;

iv. Ongoing barriers and impediments to trade with China for Australian businesses;

v. Existing strengths of Australian business in China and the scope for improvement through assistance via Commonwealth agencies and Australian Government programs;

vi. Opportunities for strengthening and deepening commercial links with China in key export sectors;

(b) Australia’s political relationship with China with particular reference to:

i. China’s emerging influence across East Asia and the South Pacific;

ii. Opportunities for strengthening the deepening political, social and cultural links between Australia and China;

iii. Political, social and cultural considerations that could impede the development of strong and mutually beneficial relationships between Australia and China; and

(c) Australian responses to China’s emergence as a regional power with particular reference to:

i. China’s relationships in East Asia, including in particular the Korean Peninsula and Japan;

ii. the strategic consequences of a China-ASEAN free trade agreement;

iii. China’s expanded activities across the South West Pacific

WITNESSES

ALLEN, Mr Rodney John, Acting Director, Australian Antarctic Division, Department of the Environment and Heritage.............................................................................................................................. 29

BUN, Ms Mara, Director, Business Development, Commonwealth Scientific and Industrial Research Organisation..................................................................................................................................... 13

BURNS, Mr Craig Stuart, General Manager, Trade Policy, Department of Agriculture, Fisheries and Forestry........................................................................................................................................................ 1

CARRUTHERS, Mr Ian, First Assistant Secretary, International, Land and Analysis Division, Australian Greenhouse Office, Department of the Environment and Heritage......................................... 29

FERRIS, Mr Jason Andrew, Assistant Director, Migratory and Marine Species Section, Department of the Environment and Heritage.............................................................................................. 29

GRINBERGS, Ms Helen Mary, Director, International Partnerships Section, Australian Greenhouse Office, Department of the Environment and Heritage............................................................ 29

LEONG, Dr Ta-Yan, Senior Adviser, Commonwealth Scientific and Industrial Research Organisation International.............................................................................................................................. 13

MORRIS, Mr Paul Charles, Executive Manager, Market Access, Department of Agriculture, Fisheries and Forestry ....................................................................................................................................... 1

SEDGLEY, Mr Simon Henry, Director, Executive and External Relations, Australian Research Council .............................................................................................................................................................. 13

SMITH, Ms Kerry Jayne, Director, International Section, Department of the Environment and Heritage............................................................................................................................................................. 29

SMITH, Professor Andrew, Fellow of the Australian Academy of Science, Australian Academy of Science........................................................................................................................................................... 13

THAPPA, Ms Nina Subhashree, Policy Adviser, International Section, Department of the Environment and Heritage.............................................................................................................................. 29

THOMAS, Dr Mandy, Executive Director, Humanities and Creative Arts, Australian Research Council .............................................................................................................................................................. 13

WILSON, Mr Ken, Assistant Director, Executive and International Affairs, Bureau of Meteorology of Australia................................................................................................................................. 29

Monday, 20 June 2005 Senate—References FAD&T 1

FOREIGN AFFAIRS, DEFENCE AND TRADE

Committee met at 4.42 pm

BURNS, Mr Craig Stuart, General Manager, Trade Policy, Department of Agriculture, Fisheries and Forestry

MORRIS, Mr Paul Charles, Executive Manager, Market Access, Department of Agriculture, Fisheries and Forestry

CHAIR (Senator Hutchins)—I declare open this meeting of the Senate Foreign Affairs, Defence and Trade References Committee and I call the committee to order. Today the committee will conduct its third public hearing into Australia’s relationship with China. The terms of reference were referred to the committee on 8 December 2004. The committee called for submissions and has received over 65 submissions to date. The committee is due to report to the Senate on 15 September 2005. Evidence given to the committee is protected by parliamentary privilege. This means that witnesses are given broad protection from action arising from what they say and that the Senate has the power to protect them from any action which disadvantages them on account of the evidence given before the committee. I remind you that the giving of false or misleading evidence to the committee may constitute a contempt of the Senate. The committee prefers all evidence to be given in public but should you at any stage wish to give any part of your evidence in private you may ask to do so and the committee will consider your request. I welcome officials from the Department of Agriculture, Fisheries and Forestry to the hearing. I now invite you to make a brief opening statement and then we will proceed to questions.

Mr Morris—Thank you for giving the Department of Agriculture, Fisheries and Forestry the opportunity to appear before the committee. I would like to make a few introductory comments on some key features of Australia’s relationship with China and highlight its importance for Australia’s agriculture, fisheries and forestry sectors.

China’s unprecedented economic growth, combined with its accession to the World Trade Organisation, has resulted in strengthening external relationships and greater export opportunities for Australian exporters. Australia is among the countries positioning themselves to supply agriculture, fisheries and forestry products to meet the rapidly increasing consumer and processing demand in China. Australia and China enjoy a strong relationship in agricultural trade. Since 1995, bilateral agricultural trade has increased at an average annual rate of 8.8 per cent.

CHAIR—We have to interrupt proceedings for a division in the Senate.

Proceedings suspended from 4.45 pm to 4.55 pm

Mr Morris—China’s population of 1.3 billion combined with their high level of economic growth and increased consumer purchasing power have generated import demands which Australian agricultural producers continue to meet. China has enormous consumer and processing demands and with 20 per cent of the world’s population and only eight per cent of the world’s arable land demand for agricultural products will continue to grow.

FAD&T 2 Senate—References Monday, 20 June 2005


China’s agricultural imports from Australia totalled $US2.41 billion in 2004, equating to around eight per cent of our total agricultural exports. Australia’s main agriculture, fisheries and forestry exports to China include wool, hides and skins, barley, live animals, cotton, meat, dairy and seafood. China’s current average tariff level for agricultural products is higher than its average tariff level for all products, reflecting Chinese sensitivities in terms of food security and social issues. China also uses a tariff rate quota administration system and import state trading arrangements for a range of agricultural goods.

Australia’s agricultural imports from China totalled $US233 million in 2004 and consisted mainly of fruit juice, sugar confectionery, biscuits, food preparations, cigars and cigarettes, pasta, nuts, frozen vegetables and sauces and condiments. Some of China’s imports of Australian agricultural products are used as inputs for processing, with Australia importing some finished and processed agricultural goods from China. The Chinese processing sector imports products under a bonded rate for processing and re-export.

Within the Australian government’s relationship with China, our department plays a key role in matters concerning bilateral trade with our portfolio industries. The role of DAFF is not to market Australian products overseas, but to promote market access opportunities through reducing or removing impediments to trade. In particular, the department pursues requests prioritised by portfolio industries to improve or maintain market access for their products into China and negotiates with Chinese authorities on bilateral quarantine issues. In 2004, an import protocol was signed to allow Australian mangoes access to the Chinese market. Access was also granted for live rabbits in 2004 and protocols were agreed for the export of meat from approved establishments. Key priorities for us are now citrus, apples, lychees, table grapes, stone fruit and cherries. DAFF appointed an agriculture counsellor to the Australian Embassy in Beijing in early 2003 and this has greatly assisted with DAFF’s capacity to pursue market access issues with key personnel in China.

The Australia-China free trade agreement will assist in further developing market opportunities. DAFF portfolio industries will benefit through negotiations on tariff reduction and improved access on tariff quota controlled products. The FTA may also assist with the clarification and reduction of non-tariff barriers, including import licensing, labelling, compositional standards, quality issues and valuation methods. DAFF has also allocated a new senior executive service band 2 position to ensure ongoing consultation and advocacy with industry and involvement in the implementation of the China free trade agreement. An FTA would also assist China to export to Australia those products for which it enjoys a comparative advantage in terms of production and export efficiency.

Aside from the FTA with China, DAFF is already involved in or instigates a number of regular meetings with Chinese officials. The Joint Ministerial Economic Commission, JMEC, is the main bilateral ministerial forum which considers DAFF portfolio issues within a broader economic spectrum. JMEC is held every two years and DAFF is involved in JMEC intersessional meetings, involving government officials, held in the years between JMEC meetings. A Joint Agricultural Commission meeting is also held every three years. There are also joint working groups on wool, forestry, SPS bilateral cooperation, plant quarantine, technical bilateral meetings, dairy issues and most recently a series of workshops under an MOU on cooperation in water management.



DAFF provides significant resources to undertake and administer cooperative activities with its counterparts in China. The department has initiated and manages a number of cooperative activities, including the long-running Australia-China Agricultural Cooperation Agreement, several memoranda of understanding and a range of other important technical and policy cooperation-capacity building type arrangements, including sanitary and phytosanitary measures. Such activities contribute a significant catalyst to the bilateral trade relationship in the agriculture, fisheries and forestry sectors.

In conclusion, DAFF is working in consultation with industry and other government agencies to ensure Australia is well placed to meet Chinese demand for agriculture, fisheries and forestry products. That concludes our opening statement and we would be happy to answer any questions that the committee may have.

Senator SANDY MACDONALD—I would like to ask a few questions on the FTA, particularly regarding agriculture. How important do you think it is for us to include agriculture in the FTA negotiations?

Mr Burns—I would see it as essential that we include agriculture as part of a comprehensive package. Our long-term interests are based on making sure that the final result of an FTA negotiation involves a comprehensive package where there might be trade-offs between sectors on both sides, and I think any suggestion that we would not include agriculture from the start would be a tactical error.

Senator SANDY MACDONALD—Do you think the agricultural sector is the one that China is most likely to be concerned about?

Mr Burns—I think they are concerned about certain aspects of our agriculture. We have a comparative advantage in land based agriculture, if you like—grains, broadacre crops et cetera. Their comparative advantage is in labour intensive agriculture, so I think they are concerned that, if they went to zero tariffs and open trade, there would be strong competition from our wheat, barley et cetera. They also have concerns that, because they have so many farmers—the average farm size in China is 0.65 hectares—obviously we have economies of scale that they cannot match. But equally, they have a strong interest in employing more people in agriculture and have a long-term plan to increase the number of people working in horticulture, for example, so they would be concerned about competition from us in that area as well.

Senator SANDY MACDONALD—In the negotiation of an FTA, are there sectors that they are more worried about than agriculture?

Mr Burns—I would not like to speculate on what other sectors they would see as of concern, but certainly they have interests, including in their western regions, where they have a lot of poor rural dwellers where they would be worried about competition.

Senator SANDY MACDONALD—Food security has always been a priority for the Chinese. I think the AWB regard China as one of their oldest clients. We have exported wheat to China since, I think, 1949, so obviously there is a very good relationship there—certainly in some areas—that goes back a long time. Is that helpful to the negotiation of the FTA?



Mr Burns—I think it is. I am not a trader myself but I understand that, for the Chinese, having a long-term and stable relationship is an important aspect of how they like to do business. The AWB would be well placed in that regard.

Senator SANDY MACDONALD—Why do they have tariff protection for their wool industry?

Mr Burns—As I indicated a little while ago, they have some vulnerabilities in their western regions where there are groups of traditional sheep farmers who produce a lot of wool—in fact, they produce more wool each year than we do—but it is of different quality to ours. And with China’s expanding textiles industry there is competition to process that wool. We would be competing at the upper end of the scale because ours is fine micron wool for producing suits et cetera. Even though we are selling to different ends of the market the producers feel threatened by our wool.

Senator SANDY MACDONALD—Where is this wool-producing area in China?

Mr Burns—It ranges through the poorer western and north-western provinces—inland.

Senator SANDY MACDONALD—What sort distance from their eastern seaboard—thousands of kilometres?

Mr Burns—Yes, a significant distance.

Mr Morris—I visited Inner Mongolia in 1992 and, even back then, processing was a big issue for the Chinese as their small ethnic minorities were involved in wool production industries. We were arguing with the Chinese at that stage about the level of tariff protection and other arrangements they had in place that affected our wool exports. Clearly they are trying to protect their small ethnic minorities in some of the outer regions, including Inner Mongolia and in the western provinces.

The other thing to note is that China is our major market for wool now. About 60 per cent of our wool—the figure is in our submission—is now going to China so, despite all the restrictions and barriers to trade, it has become our major market for wool. And it is likely to continue to be into the future, given that the Chinese need the raw material for their textile, clothing and footwear industry to process for re-export to other countries.

Senator SANDY MACDONALD—Do they buy a substantial amount of wool for early-stage processing that goes elsewhere as tops?

Mr Morris—Most of our wool goes there in raw form, and they scour it and turn it into tops as the first stage of processing. We do export a small amount of tops to the industry in China but we have been a bit uncompetitive in that segment of the market. In China they do tend to prefer to process the raw wool into tops themselves.

Senator SANDY MACDONALD—Are you aware of any evidence of further-stage processing by the Europeans in China?



Mr Morris—The Italians and the other European producers are very active in China in terms of ensuring that the Chinese make the quality of fabric that they require for their high-end garments, which are then sold to European, Japanese and other consumers around the world. My understanding is that there is a lot of interest in China by the Europeans, in particular in making sure that the fabric being produced is of the standard they require.

Senator SANDY MACDONALD—Back to agriculture in general: which areas of liberalisation are going to be of particular interest to Australian exporters?

Mr Burns—Since China joined the WTO there have been quite impressive reductions in tariffs and in a lot of the more basic border measures.

Senator SANDY MACDONALD—Is China a member of the Cairns Group?

Mr Burns—No, they are a member of the G20, but they have embarked on quite a significant liberalisation program—for example, they have done away with export subsidies, they have reduced their average tariffs quite significantly. The concerns expressed by our industries tend to be—in the jargon these days—about ‘behind the border measures’, so they are issues to do with import licensing, with how tariff rate quotas are administered. A lot of our major commodities are still subject to state trading import arrangements. Then there are issues such as the application and consistency of value-added taxes and issues to do with entry through certain ports and so on. So there is that tier of non-tariff barriers that are below the more transparent tariff issues which are the ones that our industries would like to see addressed in the FTA.

CHAIR—Following on from Senator Macdonald’s questions, does the Australian government give any Australian industries assistance to identify trends and future opportunities in China in the agricultural field?

Mr Morris—It is pretty hard to answer that in specific terms, because as far as I am aware through our portfolio I cannot think of anything specific. There is, of course, the assistance that the government gives through our portfolio for the collection of marketing levies by various agricultural organisations. The marketing levies in Meat and Livestock Australia, for example, are used for promoting meat and livestock throughout the world. I understand there are also similar arrangements in the horticultural industry. So, indirectly, there is that assistance. There is also money that goes into the National Food Industry Strategy which, again, is directed globally. It is the industries and the relevant organisations that are determining the priorities for where that money is spent. I know that China has been a priority for a number of those organisations for a number of years because of the significant importance of China to agricultural exports.

CHAIR—Who would be a member of that National Food Industry Strategy?

Mr Morris—It is a body that was formed several years ago. Its predecessor was Supermarket to Asia Ltd, which you may be aware of, and then the government formed the National Food Industry Strategy out of that. It is established, I believe, as a private organisation now but it receives government funding for a lot of its food marketing activities around the world. I must admit I am not a huge expert on NFIS Ltd but we can certainly provide further details to the committee if that would be useful. I should add that, while we do not assist with marketing directly through our department, we do have a few programs which we have mentioned in our



submission, including the Australia-China Agricultural Cooperation Agreement, which I mentioned in my opening statement. This has been a long-running program for the exchange of teams of people coming from China to Australia and vice versa. To some extent, one of the aims of that program is to develop networks between Australian and Chinese officials and industry people so that they can form those networks. There have been a few arrangements like that.

In December last year we held a business forum in conjunction with the Chinese embassy in Canberra and the Global Foundation in Melbourne. The aim of that forum, which was held in Melbourne, was to bring together business people from both Australia and China to talk about common issues. So there are a few things like that that we do which help networking between businesses in Australia and China. As I said in my presentation, as a department our main role is really to try to work on the barriers that impede trade between Australia and China rather than on the marketing aspects per se. That is why those marketing functions tend to be done more by organisations like Meat and Livestock Australia, NFIS Ltd, Horticulture Australia Ltd and so forth.

CHAIR—Thank you for that because that is where I wanted to move to next. In your submission you suggest that technical market access issues are a significant barrier to trade with China and that these include a number of measures that you have nominated. How significant are these non-tariff barriers to trade compared with our other trading partners?

Mr Morris—I think it is fair to say that China is an extremely important market for us. I mentioned in my presentation that they account for about eight per cent of our total agricultural exports now, so there was obviously quite a bit of access into that market already. Nevertheless, for particular industries the non-tariff barriers have been quite a constraint. It is fair to say that it is particularly in the horticultural sector where some of the greatest difficulties have been in accessing the Chinese market.

I mentioned that last year we managed to succeed in getting access for mangoes, which has been important for our mango producers. But we have had a long-running issue to do with citrus, for example. We have been trying to negotiate access to the Chinese market for our citrus growers for some years, and the concern there is to do with quarantine related measures. I also mentioned that other priorities for us include apples, lychees, table grapes, stone fruit and cherries. Those priorities are determined in consultation with the horticultural industry to determine where we need to get that access.

CHAIR—Last week witnesses from the department of education talked about some of the barriers in the education field. Would you say that one of the concerns in relation to the quarantine restrictions might be that they are not science based, or is the concern with the transparency of Chinese government procedures?

Mr Morris—It is really about getting them to make progress in the pest risk analysis that they do. They have a similar process to our own. For each product that we request access to their market for, they examine the pests and diseases that we have in Australia, look at their own plant and animal health situation and make determinations as to whether our product would create any risks for their market. If there are risks, they seek to put measures in place to try to control them if possible. With citrus, for example, we have been working for some time now to get them to advance their import risk assessment to a stage where we can comment on the measures that they



might propose and we can eventually have measures put in place which enable trade to occur. A few years ago the Chinese agreed to apple access from Tasmania into China. But the measures that were put in place have proved to be too non-commercial for our growers to supply product under. We have been looking at ways to see those import measures adjusted to enable trade to occur.

CHAIR—Can you explain to the committee what specific measures you are referring to? What sorts of measures make putting apples from Tasmania into China non-commercial, just as an example of this issue with the quarantine restrictions?

Mr Morris—I think we mentioned a couple of those in our submission. I will see if I can find them. I must admit I am not an expert on apple measures.

CHAIR—Is Mr Burns? Perhaps he is the apple man and you are the orange man.

Mr Burns—I am just looking for the details as well. I do recall that there are issues—and it is relevant to products other than just apples—where, for example, certification might be required that we do not have diseases in Australia which we know that we do not have but which also may not be an issue in China anyway. So there is the level of detail that you might need to go into in certification. That is the sort of issue where we see the requirements that are put on us as being onerous. Access for apples was approved in 1997 but has not been utilised because the protocol includes diseases not present in Tasmania, including European canker, fire blight and fruit fly. Biosecurity Australia did provide a submission, with data, to remove canker and fire blight from those requirements in August 2000 and March 2001, and again in 2003 and in April 2004. So we have made submissions to try to have that requirement removed.

CHAIR—But originally we agreed to those diseases being included on the basis that they did not exist anyway, so it did not matter—would that be fair?

Mr Morris—Sometimes it is not a case of us agreeing; it is the measures that they tell us they want to impose on us.

CHAIR—And if we want to sell our apples to China that is the deal.

Mr Morris—It is a bit similar to what we do when we put measures in place to protect our horticultural and other industries against pests and diseases from other countries. It is the Australian government—in our case Biosecurity Australia—who determines what the appropriate measures are that might be put in place, rather than the decision being made through a negotiation process with the country that wants to export to us. So in this case it is really China determining what the best science based measures are to protect it against perceived threats of pests and diseases. We can—as in the case of apples—believe that those measures are not appropriate for us and then we have to go back and demonstrate that we are in fact free of those diseases, so that we can have those measures adjusted to reflect our actual pest and disease status. That is what we have been trying to do with respect to apples and other plant products. I should mention—



CHAIR—Is part of the concern of our exporters the fact that in the end it is just not worth the effort, because for every disease you eliminate another is put forward? Is that what groups like, say, the NFF are concerned about—the transparency?

Mr Morris—I do not think so. They may express those concerns—and perhaps you should ask the NFF about that—but from our perspective the protocol on mangoes would certainly seem to be one where we can export product there. We have arrangements on other products, on meats and on live animals for example, where clearly trade does occur under those protocols. It is really a case of us working with the Chinese to ensure that our pest and disease status is appropriately represented in their import risk analyses and that the measures they put in place are scientifically justified against those measures. We do have very good relationships with the quarantine authorities in China. We have been working for a long time on technical cooperation with the Chinese, and that work has included having some of their officials sit within our department for about three months at the end of last year so that they could become accustomed to how we operate. We put our counsellor there in 2003, and that has also helped to develop relationships with the quarantine authorities there. I think in the long run those relationships we are building will have a beneficial effect in terms of getting access.

One point I should make is that these quarantine issues that we have been talking about are not subject to negotiation under the FTA. In the same way that Australia does not negotiate its quarantine measures, China also will not be expected to negotiate its scientific measures on quarantine matters as part of the FTA. However, in order that some of the gains we might get out of the FTA do result in real trade, we as a department need to move in parallel with the FTA in negotiations, trying to advance as best we can the scientific issues to do with quarantine market access, as we have over the last few years. Certainly we will be endeavouring to do that over the next little while.

CHAIR—How do you overcome that concern that quarantine restrictions are not science based? How is that not able to be discussed at the FTA level, if it gets to that stage?

Mr Morris—We do deal with that head-on through our negotiations with them and through technical and training cooperation activities that we do with the Chinese. We do try to provide assistance to Chinese quarantine officials and the people there who are actually doing import risk assessments, to bring them up to world standard. China is a member of the WTO now and, as such, under the WTO Sanitary and Phytosanitary Agreement it has obligations to adhere to a science based approach to import risk analyses. We provide training and assistance to enable the Chinese to try to do that. That is probably the main way we approach that.

Mr Burns—We were very keen to make sure that this was seen as a separate track from the negotiations and that we were seen to have an ongoing process for dealing with these quarantine issues. And that is multifaceted: in addition to the regular, broad economic discussions with China, which I am sure the Department of Foreign Affairs and Trade referred to, we do have annual plant bilateral meetings where a lot of these issues are discussed with senior people from both sides. Also, if we feel that issues are not being dealt with in a manner consistent with the WTO SPS agreement, we can raise those issues in the SPS committee in Geneva and have side discussions with the Chinese there in an, if you like, more official sense. So we believe we have a number of mechanisms in which these issues can and should be addressed separately from the FTA process.



CHAIR—Have issues in dispute been referred to this SPS committee in the past? Are there any there at the moment?

Mr Burns—It would depend on what you call a dispute. There are issues that we have raised within the committee and about which we have asked China questions. Sometimes we might have a meeting with the Chinese side at the margins of the meeting, as we do with many countries. We have not got to a stage where we have had to lodge a formal concern or complaint against China. It would be very serious before you took it to that level, but we have not got to that stage.

CHAIR—Weren’t these similar issues part of the Australia-US Free Trade Agreement as well?

Mr Morris—Correct.

CHAIR—The NFF in its submission to us has a particular concern about agricultural exporters, and it states:

Many agricultural exporters cite instances of non-adherence to contractual obligations when doing business with China.

I do not know whether you have seen a copy of the submission. Is this a problem that the department is aware of that particularly affects Australian exporters to China?

Mr Burns—It is an issue being raised in consultations that the Department of Foreign Affairs and Trade has organised with industry groups. At the moment we are in a process of face-to-face consultations with industries, but also industries are putting in submissions to DFAT for the negotiations. An initial round of submissions was put in for the FTA feasibility study, and now industry is open to put in submissions that go into these issues in more detail. I have heard only general comments about the contractual issue that you referred to. I have not sighted specific examples or gone into detail on those. But if there are specific examples I suspect that industry would raise them in their submissions, if they wish those to be public of course.

Mr Morris—Those sorts of issues can be addressed as part of the FTA in theory, although sometimes they are a little difficult to get a handle on and to specifically address. There is a range of non-tariff barriers unrelated to quarantine, which I think Mr Burns referred to earlier, which can be part of the FTA discussions. Those include licensing and other restrictive arrangements that might limit our imports, and because they do go more to the heart of trade they can be discussed as part of the FTA.

Mr Burns—I think that contractual issue goes beyond agriculture. I know that the NFF referred to it in their submission, but I have heard verbally that other sectors have the same issue.

CHAIR—Yes. We have had issues raised, but I wondered whether there were any specific to agriculture as raised by the NFF. Turning to the China-ASEAN Free Trade Agreement, do you have any information on how China’s FTA with ASEAN will impact on Australia’s agricultural exports to ASEAN countries or to China? Has any study been done on that, or have there been any discussions?



Mr Burns—No. As you would know from talking to the Department of Foreign Affairs and Trade, a modelling exercise was done for the feasibility study on the Australia-China FTA. I am not aware of any studies that have looked at that other issue you referred to. But it is of course worth remembering that the approach China is taking to their negotiation with ASEAN is slightly different from the approach we intend to take with China. We are looking at a single-undertaking, comprehensive negotiation. In the case of China and ASEAN, there have been some early harvest issues and there is not an end date for the whole process. It is difficult at this stage to predict how that is going to end up. It would be pure speculation at this stage to try to assess what that might mean for us.

CHAIR—I want to move on to crops. I have some specific questions on sectors here. The department’s submission states that China is an important producer of all the major crops produced by Australia and that its production capability for most crops is far above that of Australia. Although future trends could see China move away from extensive crop production, raising demand for imports, this may not happen in the medium term, and competition from other exporters may be stronger in the long term. When you say that China may increase its imports of certain crops in future, what sort of time frame are you talking about?

Mr Burns—Again, that is something that is a bit difficult to predict. China currently has a policy—if you like, a law—of 95 per cent self-sufficiency in crop production in grains. Interestingly, they include things like potatoes in that ratio. It is increasingly difficult for them to meet that target, because they have diminishing land available for agriculture, they have a water shortage problem and they have an increasing population. Over the long term, most people who are looking at the future of Chinese agriculture are suggesting that China will, by necessity, move away from that 95 per cent target and shift from grain production into more labour-intensive production such as horticulture and even dairying and so on. That should logically open up more opportunities for exports.

CHAIR—Which other countries would be competitive exporters of these crops?

Mr Burns—The other major grain producers such as the European Union, the United States and Canada.

CHAIR—Is it possible or likely that further progress in agricultural technologies will make China a more efficient producer of many crops than Australia?

Mr Burns—That is a possibility, but again there are constraints. In particular, as I indicated earlier, the average farm size in China is so small that the advantages that come with extensive cropping are just not going to flow to them. They are looking at biotechnology—and even GM crops in some cases—as a future option, but while they maintain a policy of not wanting to have people shift from rural areas into urban areas they will still keep farm sizes small, so it is difficult to see them competing with us in terms of economies of scale.

Mr Morris—It is also worth remembering a couple of the figures that I mentioned earlier. China has 20 per cent of the world’s population but only eight per cent of the arable land, so that creates a real limit on the extent to which they can grow their agriculture beyond what they need to feed their own population.



CHAIR—I think you said that 0.5 hectares was the average.

Mr Burns—I think I said 0.65.

CHAIR—Is that changing?

Mr Burns—No, not really.

CHAIR—Has it changed in the last 10 or 20 years?

Mr Burns—No. It has remained fairly constant, as I understand it, partly because they are losing agricultural land at quite a significant rate. Their future depends on the extent to which they can, for example, have significant water projects to move water from the south to the north, where there is a lot of grain produced. That is a pretty big undertaking. The extent to which they have some significant projects like that and perhaps introduce more biotechnology factors will affect their competitiveness, but on the surface it is difficult to see them being able to come up with our level of competitiveness.

CHAIR—In your submission you mention a number of crops that seem to go both ways—oilseed, sugar and rice. Do some people like Chinese rice and some people like Australian rice?

Mr Morris—There are quality issues there. That is one of the big things. For example, as Mr Burns was saying, they produce a coarser wool than we do. Theirs might be more suitable for carpets, whereas we produce a finer wool for clothing. We import wool from New Zealand, which sounds a bit odd as well, and we do it for the same sort of reason—a quality differential. It is the nature of global trade that quite often these days Australian producers, because of the nature of agriculture and the development of agriculture in Australia, are becoming much more focused on particular customer needs and higher quality into the market. We are providing particular qualities for particular markets. Quite often, we may be importing different qualities into Australia from exactly the same markets, as you suggest. Globally it is very much becoming two-way trade with a lot of products. However, in aggregate, as I have mentioned, our agricultural exports to China are almost $US2½ billion compared to only about $US233 million going from China to Australia. There is still quite a discrepancy.

Mr Burns—We would also argue that the trade can be complementary. For example, in horticulture we could have counter-seasonal trade. And we would regard it as complementary with wool, because we are helping to develop their urban textile industries et cetera.

CHAIR—Just on horticulture, where do most of China’s horticultural products come from? Are you aware?

Mr Burns—Which regions?

CHAIR—Imports.

Mr Morris—We would have to review it, but most of the major areas—

CHAIR—Are we second, third or what?



Mr Morris—In terms of imports?

CHAIR—Yes.

Mr Morris—Imports from China or Australia exporting products to China?

CHAIR—Chinese imports—our exports or somebody else’s exports.

Mr Morris—A lot of our exports in the past have been to Hong Kong rather than to mainland China. Some of that trade has been affected and fallen in recent times. As I understand it, other countries have probably got some better access into China than we have, which is why we have been striving to improve the quarantine arrangements for our products. In terms of where China sits in terms of our total horticultural exports, I would have to take that on notice. I am not sure exactly where it sits at the moment.

CHAIR—Fair enough. I have one final question. Do you expect the export of dairy products to grow in the future in the light of China’s developing dairy industry?

Mr Burns—I think our dairy exports, both in terms of live dairy cattle and in terms of finished dairy products, are set to grow. The processed dairy products have been growing steadily over the years. The live dairy cow exports have been interesting. We exported 4.2 million head in 1990 but 8.9 million in 2002. That has been growing at 9.7 per cent per annum. I think we will find that, as China develops their own dairy industry, the milk that they produce will go into the fresh market and, certainly in the short term, they will not have the capacity to develop a significant processed dairy industry. As dairy products—milk and dairy—become a more significant part of the diet, as projections seem to indicate will be the case, then, logically, processed dairy products will need to be imported. Again, with New Zealand, we would be well placed to meet that market.

CHAIR—Is that part of the National Food Industry Strategy? Is that where that is tied up or is it another—

Mr Morris—Dairy Australia would be one of the key proponents for exports to China. I know they have been very active in China over the years in terms of trying to increase our dairy exports into that market.

CHAIR—I have no more questions. Thank you very much.

Proceedings suspended from 5.40 pm to 5.56 pm



SMITH, Professor Andrew, Fellow of the Australian Academy of Science, Australian Academy of Science

SEDGLEY, Mr Simon Henry, Director, Executive and External Relations, Australian Research Council

THOMAS, Dr Mandy, Executive Director, Humanities and Creative Arts, Australian Research Council

BUN, Ms Mara, Director, Business Development, Commonwealth Scientific and Industrial Research Organisation

LEONG, Dr Ta-Yan, Senior Adviser, Commonwealth Scientific and Industrial Research Organisation International

CHAIR—I welcome to this hearing representatives of the CSIRO, the Australian Research Council and the Australian Academy of Science. The three groups can make opening statements, if they would like, and then there will be some questions.

Prof. Smith—Who is going to be first?

CHAIR—Actually, Simon, because they looked to the middle, you might want to go first.

Mr Sedgley—Okay.

CHAIR—Or Dr Thomas.

Mr Sedgley—We can perhaps share the load. The Australian Research Council funds the highest quality research in Australia across essentially all research disciplines, excluding medical research, which is the province of the National Health and Medical Research Council. We fund research in response to investigator initiated proposals. Researchers, for the most part in universities around Australia, apply to the Australian Research Council for funding under a range of programs that collectively sit under the umbrella of the National Competitive Grants Program. In a nutshell, that is our business. We also provide a major source of advice to the government on the national research effort and research policy. We make quite a significant contribution to supporting international linkages across the National Competitive Grants Program. Approximately one-fifth of the budget, under various programs, goes to supporting research that involves significant international collaborations. I might leave it at that, unless Mandy wants to say a bit more.

CHAIR—Thank you. Prof. Smith, would you like to make a statement?

Prof. Smith—The two academies—the Academy of Science and the Academy of Technological Sciences and Engineering—both interact with their equivalent academies of science in China and have increasingly been involved in planning high-level mutual understandings, brokering memoranda of understanding and the like. We see this academy-to-



academy interaction as very important. We also run exchange programs, targeted in many respects, including China. We see China as being a most important partner in science and technology. This comes from the enormous amount of money that China is putting into research and development. It is the third in the world at the moment, after the USA and Japan, and I suspect that in a couple of years it will be ahead of Japan. China is a really big spender in targeted areas of research and development, most of which, I think, are very similar to our own. I was very pleased to see that where we were coming from in our brief submission was very similar to the CSIRO submission in targeting not just fundamental research but also research which will have commercial applications. I am sure that our CSIRO colleagues will wish to comment on that.

Ms Bun—We are pleased to be here today. The CSIRO has been engaging with China since 1975. Over the last 30 years, we have a track record of over 140 scientific collaborations, many were initially in the areas of primary industry and agriculture but now that is broadening out. Since 2002, we have had 57 active collaborations, of which 29 are still under way. They reach across areas including the environment and natural resources, radio astronomy, manufacturing and construction, minerals, energy, mining, ICT, and health and food sciences. So there is quite a broad interaction. We estimate that, over that period, some $24 million has been invested by us and our Chinese partners across these various areas. I think our submission outlined a number of memoranda of understanding which are quite complementary. We have been working with the Chinese academy in particular since 1985.

We also have quite a significant group of Chinese scientists who work with us. We have some 322 staff members, around 250 of whom were born in China. It is quite true that the innovation system in China is dramatically expanding. I gather that something like 300,000 engineers are being graduated in China on an annual basis. This becomes a critical resource in the longer term for Australian science. We certainly hope that this type of collaboration will lead very much to a strengthening of our innovation system with trade and cultural links as well.

CHAIR—I will commence by asking some agency specific questions and then a series of questions which I would like all three bodies to comment on. Professor Smith, the academy’s submission identifies the interesting concept of the triple bottom line and states that the S&T relationship is fundamental to economic, environmental and social development. Could you elaborate on that point?

Prof. Smith—The Chinese side are very much involved in managing their environment, which, as we know, with the population pressures, the very nature of their climate, their soil types and their water problems, they see as being of great fundamental importance. That is one of their priority areas which, I think, resonates very much with us in Australia. Even though our population density is very different, we do have some things in common. Also, the Chinese are very conscious of the issues of global warming and greenhouse gases—the Chinese Academy of Sciences is one of the signatories of the document recently released by the top group of learned academies—and on the environmental management side this is very clear.

That relates firstly into the economic side quite clearly. Their mining industry is by some standards very primitive and certainly some of these interactions coming out of CSIRO and the universities are improving mining techniques and mining quality. Those two parts of the triple bottom line, I think, are very clearly linked. They are there on the social side as well, relating to



the population densities and the population shifts as they move from country to city, from rural economy to factory economy to probably a much more sophisticated economy. The Chinese are very well aware of the triple bottom line issues in the context of science and technology.

CHAIR—Would anybody else like to comment on that statement?

Ms Bun—If I could elaborate, I think it is an important observation. Certainly the work that CSIRO has been involved with in predicting outbursts of coal and gas in seams that lend to very significant safety issues in China has had a powerful social impact, I think, going to one of those bottom lines. Equally, there is the ability of the Chinese, with the benefit of this collaboration, to in effect handle and refine ores at more sophisticated levels. It certainly goes to the ability of Australia to achieve higher prices in its export of ores. To another one of those dimensions, on the environment side, the climate change issue is very important to the Chinese and will be fruitful ground for collaboration. Another example, which is very relevant to us, is the work we have done in the north China plains around salinity which has been directly applicable in South Australia. So some of the work can come back to benefit in Australia itself.

CHAIR—Thank you. Again to the academy, your submission states in terms of developing the bilateral relationship that one of the factors in Australia’s favour at the moment is:

Political developments that now favour Australia as a partner country for S&T (including training) over the USA ...

Could you expand on that statement, Professor Smith?

Prof. Smith—It is a bold statement. It was prompted by the visit by the President of the Chinese Academy of Sciences, Professor Lu, last year. The Chinese Academy of Sciences is a huge operation. It is like a super CSIRO, about six times bigger, in fact. There have been, over the last few years, annual talks at very high level between the USA and China. When Professor Lu visited Australia he went back to China and said, ‘We must have a similar set of talks with Australia.’ We had the first one last year in Australia. The second one will be this year in Beijing. He clearly sees Australia as being a very favourable partner to do some of the things we have just been talking about. I think he, in particular, sees Australia as being a friendly country with fewer political issues than are involved in the USA. But also I think there are many of the younger scientists, some of whom have been mentioned—a lot of them are in Australia and a lot in the USA—who are now going home. They are being sought by China. These scientists too see Australia as a friend and wish to maintain these networks. Certainly, talking both to the senior Chinese scientists and to some of the new, young, up-and-coming professors, they see Australia, for some of the reasons given in our submission, as being a very natural partner for science and technology.

CHAIR—Are there any specific political developments?

Prof. Smith—No, it was a general comment that the tensions are often greater, on the surface, between the USA and China than between Australia and China.

CHAIR—The CSIRO submission states that we have a longstanding relationship with China and that it has been rich and mutual and mutually beneficial. The submission claims that it has developed not only scientific but trade, cultural and social benefits for the country. Ms Bun, you



have already outlined some of those issues. Are there any other cultural, social or trade related benefits in addition to what you have already outlined that you would like to bring before the committee?

Ms Bun—An example that I could use—and perhaps Ta-Yan is well placed to complement this—is the grains industry, which is of course an area of vitally important trade between Australia and China. In the grains industry, it is important for storage to deliver a high-quality product which has a lifespan which is highly competitive relative to alternatives. Through the work that the grains industry in Australia has done with CSIRO around stored grains, laboratories and value added technologies and so forth, I think it is fair to say that we have a value added path to China. It has been very interesting for me to observe the leadership role that some key Chinese thinkers within CSIRO have played in forming that. These are young scientists who have been involved in developing the equivalent of the AQIS system in China and have now come to Australia to help forge this partnership, again of mutual benefit. I think what happens in a very beneficial way culturally is that, through these exchanges, the grains industry in Australia is able to partner and have an entree into China which is actually translated or put into a context which is much more accepted, much more contemporary and much more connected on the ground, through science. In my observation that is very valuable to the farming community here, and certainly it does feature in terms of economic benefit. Ta-Yan, perhaps you could comment on the cultural benefits.

Dr Leong—As Mara indicated earlier on, we have about 300 Chinese scholars working in the CSIRO, and that has facilitated a lot of interchange between Australia and China over the years. Another example that I would like to cite which has cultural, social and maybe some trade advantage to Australia is the work that we have done with the Beijing Meteorological Bureau to help them predict air quality over Beijing, which they could then expand to other parts of China to help them understand the sources of all the pollution and so on. This has a big impact on the green Beijing Olympics in 2008. This is going to impact both socially and culturally.

CHAIR—Currently there are 300 scholars within the CSIRO in Australia. Is that correct?

Dr Leong—Yes.

CHAIR—Are they here on some sort of term? How long are their terms here?

Dr Leong—Some are staff members of the CSIRO recruited from within Australia or from China.

CHAIR—Ms Bun said we have had a relationship with China since 1975, so that must mean there have been thousands of people who have come to Australia from China and then have gone back, and may be in senior positions within science and technology, one would hope. What about the other way: do we have Australians going to China?

Ms Bun—In our submission, we tried to document eight or 10 examples of Australian scholars who have made such a contribution in China that they have received prizes—in one case, an honorary citizenship and in another case invitations to organise major conferences and the like. I am not aware of how many Australian CSIRO scientists might be living in China, but



at any given point in time with these 29 active projects that we have there are certainly missions going back and forth and teams in place doing particular tasks.

CHAIR—So there would be hundreds who have been to China in the last 30 years, not potentially thousands?

Ms Bun—There would be more than hundreds.

Prof. Smith—There is certainly an imbalance. The eyes of Australian science are very much on China and many more people wish to go. I am not here representing DEST—DEST were here a week ago. I am chair of the assessment panel for the China-Australia special agreement that DEST runs. We have just finished assessing 82 grant applications. The majority of those Australian chief investigators have Chinese names and it is quite clear that, as part of that program, they wish to go to China. It is not a matter of going for, say, 10 days or two weeks to set up something; it is a matter of going to do things. I think at that level it will become much more balanced and it is going to be a matter of equals interacting with each other. That is what is so important, which the CSIRO statistics showed up. Also across the university sector the same thing is happening and I think that is terrific.

CHAIR—The Academy of Science’s submission talks about political developments and the CSIRO submission talks about how our enhanced relationship has the potential to impact on our political relationship. Would you like to expand on that for the committee?

Ms Bun—To the extent that Australia has national research priorities and that those are governed by a governance factor which is political in tone and probably fairly generic, I would image that over time the ability for science to navigate between the priorities in science in one country and in another will foster a greater relevance around that exchange—it is really that broad. So areas like water and energy are critical priorities for CSIRO. They absolutely align with the relevant research priorities at a national level in Australia and they have been confirmed at a political level in China as the basis for heightened collaboration—I think that is only appropriate.

Prof. Smith—I would see it almost as similar to the outcomes of the Colombo plan. The Colombo plan is long gone but the outcomes are still there in links that are at a very high level now between Australia and Colombo plan countries. I see our relationship with China as going the same way basically, building up the networks and mutual respect which will come out. That is at a slightly different level, but that is one of the great values of what we are doing.

Dr Thomas—The Australian Research Council fund quite a lot of collaborative projects with China in the humanities and social sciences as well as in the sciences. Those projects encompass things such as major collaborative projects in archaeology, in Chinese history, in Chinese literature, in the media and in the position of women in society. In human rights there is an increasing openness and many researchers in Australia in human rights law and in international law are working in China with collaborative partners on those sorts of issues. Likewise in issues such as exploring civil society, all of those sorts of themes are increasingly important areas for collaboration between Australian researchers and researchers in China.



CHAIR—How do you collaborate with China on a project in, say, human rights or human rights law? When I think of human rights I am thinking of rights for women, for minorities, for Falun Gong—

Dr Thomas—It is with researchers at universities in China who are looking at law and policy issues related to those things. It does not necessarily feed directly into government policy in China. There are now researchers who are permitted to work in those fields and there are Australian researchers specialising in that area who go to China to look at social change and its impact on human rights law.

CHAIR—How many people does the Research Council have in China at the moment?

Dr Thomas—At the moment, there are 197 projects—across the range of projects—that include collaborations with China. There are centres of excellence that have Chinese collaborative partners and there are Federation Fellowships. Just this week we funded a Federation Fellow who for the next five years will be working on Chinese cultural history and the impact of the Beijing Olympics on society. That is a very prestigious fellowship that will involve a lot of direct contact with researchers in China. We have Linkage-International fellowships as well as awards for travel—fellowships that fund researchers from China to come to Australia from three months to one year at a time. There are presently about 10 funded in that area.

CHAIR—Is that part of the 197 projects?

Dr Thomas—Yes. That is right.

CHAIR—So the 197 projects include activities in China and activities in Australia?

Dr Thomas—That is right.

CHAIR—Do you know how many projects are in China and how many are in Australia? Is it 100 in China and 97 in Australia?

Dr Thomas—No, they are all collaborative. They are joint projects.

CHAIR—So there is no particular science based project in China? Or is that not the nature of the Research Council?

Dr Thomas—There are some researchers in China on projects which they are collaborating with Australian researchers on. They include partner organisations or companies in China that are collaborating partners for Linkage projects in Australia which are collaborations between researchers and industry. So we have some industry partners in China. Then there are researcher-to-researcher collaborations where they are working on joint publications.

CHAIR—Can you give me an example of an industry collaborative project in China?



Dr Thomas—Sopo Battery Energy Company, Lead Cell Dynamic Energy Corporation, Kanion Pharmaceutical Company and Microsoft Research Asia are some of the partner organisations that put money into these collaborative projects.

CHAIR—What would they be doing in, say, the first of those? Are details publicly available of what exactly the collaborative project is?

Dr Thomas—Yes. I can tell you what it is.

CHAIR—Could you make available to us the details of the 197 projects?

Dr Thomas—We can let you know all the projects that we have funded. We have a list of them.

CHAIR—That would be helpful. Does the archaeology project involve an Australian scholar in China or a Chinese scholar being assisted to—

Dr Thomas—That project is ‘Understanding the early phases of Neolithic dispersal in the Western Pacific’. A lot of Asia-Pacific archaeology involves working across Asia—not just in China—and the Pacific to look at the historical movement of populations. Most archaeological projects involve many countries working together. They look at the material together and they might work together on archaeological digs in China. There are Australian researchers working in China on these projects with Chinese, Pacific and probably United States and European researchers all together.

CHAIR—Does ‘collaborative’ mean that these projects are jointly funded?

Dr Thomas—The Australian researchers will be funded by the Australian Research Council and the Chinese ones would be funded probably by the National Natural Science Foundation of China.

CHAIR—So the 197 projects are funded solely by the Australian Research Council?

Dr Thomas—That is right.

CHAIR—There is no other contribution to those projects?

Dr Thomas—Except those collaborative partnerships that I was telling you about where the other organisations are putting money into it as well. Most of the time when we fund collaborative projects in the Linkage-International scheme, the universities in China have to show that they are giving in-kind support as well.

CHAIR—Professor Smith referred to the fact that we had the department of education—DEST—here last week. They named bilateral arrangements such as the Australia-China Joint Science and Technology Cooperation Committee and the Australia-China Special Fund for Science and Technology Cooperation. What part, if any, do your agencies play in any of these arrangements?



Prof. Smith—I am on the panel because I am a fellow of our academy. That is why I am on the panel for the Australia-China fund.

CHAIR—That is where, as you were referring to earlier, you have been supervising grants?

Prof. Smith—Yes—choosing grants.

CHAIR—What about the ARC?

Mr Sedgley—The first of the two that you just mentioned—the joint science and technology committee—had a meeting in August last year, I believe, and the Australian Research Council had two representatives, I think, on the Australian delegation to that meeting, which was in China. So the ARC plays a significant contributory role to that particular forum, along with our partners within the portfolio, DEST, and other agencies, including CSIRO. I think the second of the two you just mentioned is a DEST-specific funding program.

Dr Leong—CSIRO was represented at the joint committee on science and technology meeting with China last year. Our researchers actually benefited from that special China fund administered by DEST. Right now I think there are at least two projects that are funded by that program.

CHAIR—What are those projects?

Dr Leong—One is on grain storage—using new fumigants—and the other one is on the seismic analysis of mineral deposit ore bodies.

Prof. Smith—Again, it links both CSIRO and the academy. The first Australia-China symposium was funded partly by China and partly by DEST. It was administered by the two academies and had a lot of input from CSIRO. So it was very much a joint agency operation but done under the DEST umbrella in Australia.

CHAIR—That is good to know. Are your organisations involved in the Prime Minister’s Science, Engineering and Innovation Council project into Asia’s economic and scientific growth?

Prof. Smith—Yes.

Ms Bun—Yes—our chief executive is.

CHAIR—What level of involvement is there with that body?

Ms Bun—I believe that at the moment there is a subcommittee working on that exact issue and we are represented on it.

CHAIR—All bodies?

Mr Sedgley—The chairman of the Australian Research Council is a member of PMSEIC.



Prof. Smith—And the president of the Academy of Science is as well. I think the presidents of the other academies are also members of that committee.

Ms Bun—I should say the CEO of CSIRO is also on PMSEIC.

Prof. Smith—We are all in there.

CHAIR—Everybody is involved in everything. DEST also gave evidence that currently the department is considering whether it would be worth while to recruit a very science literate locally engaged staff member in China. What is your view of this proposal of having a very science literate person from DEST located in China?

Prof. Smith—It demonstrates an obvious commitment from DEST, which I welcome. I would think that there would be some very good people who could be involved and be of great benefit.

CHAIR—Where would be the best place to locate someone in China—if you were giving advice? They will have a look; you can give your advice.

Prof. Smith—Most things go off in Beijing.

Ms Bun—I think it is fair to say that Beijing is pretty much the nexus. However, there is a big ‘go west’ push in China now. Given the shape of the Australian economy, agriculture and so forth, that sort of capability would be fantastic.

CHAIR—Do you have a view about how DEST are performing their role in promoting Australia’s relationship with China in science and technology? Is it something they could do better? Are there areas that you think they should concentrate on? Are there other roles or functions their councillors should pursue? If you feel there is something they should be listening to, this is an opportunity to state it here and now.

Prof. Smith—The fact is that the competition for doing collaborative research now is enormous. That is one hard fact. The success rate of the applications I am involved in is very, very low indeed. I am not blaming DEST for not putting enough money in—for obvious reasons: they have to decide where to put the money. I also know that the money in that scheme has just gone up. I see that pressure coming in from the researchers in Australia, and also from those in China who apply to their organisations to come and collaborate here, as certainly being a good indicator that there is scope there, if DEST so wishes, to give higher priority to China in developing where it puts its money. In that case, I guess I have an interest in that particular scheme. I do not have a personal financial interest; I do not have a grant from it. I would certainly expect DEST to start to do these sorts of things—just because of consumer demand, if you think of the scientists as the consumers.

Ms Bun—Could I add, not so much as a criticism of existing activity but just as an observation, that the transition that China is going through will inevitably mean that over time the needs for commercialising science and partnerships which are about fundamental research will find a path to impact in the marketplace, and therefore there will be greater activity around the collaborators that help to deliver that path. Whether that is through DEST, the industry departments or other mechanisms, those are important links for Australia to forge.



Mr Sedgley—I might make one comment there. It is not meant as a criticism of DEST. I think it is fair to say that there are a large number of agencies across government that have a very strong interest in supporting international scientific and research links. They all do that in a way which is sensitive to their own specific missions, and that is right and proper. Perhaps something that may be lacking at present is an exercise whereby those different agencies sit around a table, examine what each of them is trying to do internationally—not just in China, but elsewhere—and look for the complementarities that might exist to bring a bit more focus to their individual strategies. This is something that the ARC CEO proposed at a recent Coordination Committee on Science and Technology meeting. It is possibly something that, if there were support across the different agencies, could be taken up through a forum like PMSEIC.

CHAIR—One gets the impression that there is some degree of coordination about our relationship and a step back sometimes in allowing various bodies to pursue their goals in China. In a way, is there a role for DEST to be more active, or is that not an accurate observation of what they should be doing in regard to that?

Dr Thomas—There are two components of research collaboration with China. One is researcher driven collaboration. That is predominantly what the Australian Research Council and DEST are funding through that program. There is also the possibility of agency-to-agency collaboration where you can actually mould in more definite ways what people could collaborate in—what sorts of themes and areas they could collaborate in and how they could collaborate. There is the potential to do more of that in the future. To a large degree it has been researcher driven up to now. Now that there is a DEST councillor in Beijing, I believe, that will assist the process enormously in managing those relationships between agencies—not just between researchers themselves, but between all the academies and all the different foundations and other bodies in China that would be involved in research. It also needs to happen on the Chinese side. The DEST position in Beijing will be very important.

Dr Leong—I think DEST has got one councillor in Beijing and one in Shanghai. We are in close contact with both of them and they have been very helpful on all occasions.

CHAIR—Does the Chinese government have an equivalent officer?

Dr Leong—They have the science unit within the Chinese embassy here in Canberra. I think there are two staff members there as well.

Prof. Smith—Do you know who they are accredited to—the S&T? Science and technology is by no means monolithic in China, is it? I was interested in to whom they report.

Dr Leong—Which ones?

Prof. Smith—The ones in Canberra.

Dr Leong—In the Chinese embassy?

Prof. Smith—Yes, in the Chinese science and technology system.

Dr Leong—They are both from the Ministry of Science and Technology.



Prof. Smith—That is what I thought.

CHAIR—I was leading on to whether there is something in the two councillors’ roles here that we could learn from. Does the Ministry of Science and Technology in China have as much authority as our people—or more authority or less authority? Do our people need more authority in China? You know the nature of our inquiry—what our relationship with China is. We asked a lot of questions about what is happening over there, but we also want to know what is happening here.

Dr Thomas—It is probably important to point out that right at the moment China is developing a major science plan. They are developing this plan for the next 15 to 20 years. We have been informed of this by the DEST councillor. It is a transition moment. Apparently more than 2,000 scientists will be called together in China to develop this future focus plan. We are awaiting outcomes from that. We hope to use the DEST councillors in China and also the embassy here to get more information about how that is going to be focused. Then we can see how we can feed into it.

CHAIR—Has this conference been held?

Dr Thomas—It will be in October this year.

CHAIR—Are observers able to attend that?

Dr Thomas—I do not know if the DEST councillor is going to be present, but they are certainly monitoring—

CHAIR—Are Australians able to attend this?

Dr Thomas—I do not know the answer to that.

CHAIR—So we would have to go through the councillors here to see what might be the outcome. What comes out of the science plan could have quite significant economic, cultural, political and social impacts for us and the rest of the world.

Prof. Smith—One of the things that the visitors are always interested in when they visit my university is, because we are co-located with CSIRO staff and state government staff, how we all get on together. I get the impression that in Australia there are far fewer barriers and boundaries between scientists from different organisations than there are in China. I suspect they still have a legacy of, let us say, the relatively well-funded Chinese Academy of Sciences institutes and many of the universities, which are much less well funded. They are absolutely fascinated by CSIRO staff who have affiliate positions in universities or joint positions. I suspect that what the Chinese are going to do is to start to break down some of those barriers in their own system. We have had two or three quite high ranking delegations and they all jump in on this issue: how is it that I can interact with CSIRO staff? I say: ‘Of course we do. What’s the problem?’ Clearly, in China there still are some of these bigger boundaries, which we used to have in Australia but which I think are now rapidly going. I suspect they will go there too.



Ms Bun—Also, Senator Hutchins, going to your point of the importance of the science plan—and it will be important—CSIRO has entered into a memorandum of understanding with the Ministry of Education, which was signed in March. I believe we signed in the Senate just last month. We are in the process of finalising another MOU with the Ministry of Science and Technology. Very clearly through that dialogue we have agreed on a number of areas of priority, of mutual benefit to both sides. I think there are strong signals of what things are likely to emerge out of the science planning process. They are not surprising. They are aligned to both economies, which in many ways are similar.

CHAIR—So with that science plan, once again, there are no outside observers?

Ms Bun—I do not know; I cannot answer that question.

CHAIR—Ms Bun, we spoke earlier about the number of scientists who would have been trained in Australia who would have done postgraduate work here and who would have gone back to China. Amongst your three groups, do we have any idea how many Chinese scientists would currently be working in Australian institutions at all? That would be in addition to, say, your 300, and the 197 projects here. You have not even dropped a figure on us, Professor Smith.

Prof. Smith—I will have to shake my head, but certainly there are many, many more now rising up through the system. Are we talking permanent staff?

CHAIR—Permanent people here on study. We are just trying to get an idea of what sort of degree of movement there is with Chinese scientists coming here to study our system, although whether they go back or not is another debate, I suppose.

Prof. Smith—I became deeply involved in China only about five years ago, so my experience is quite limited. But the numbers really are rapidly going up. Also, the Chinese scientists find it much easier to travel now. They can get currency to travel and contribute to airfares—the sorts of joint programs that ARC are involved in as well. They are putting hard cash into travel. I think that will increase the number of visits. But I would hate to have to sort out figures across the university system as to how many sabbatical visits we get from China.

CHAIR—But is it significant?

Prof. Smith—Oh yes.

CHAIR—The number is much more than 10 years ago, or even five years ago, I would imagine, given what you are saying.

Prof. Smith—Yes, from personal experience.

CHAIR—We have heard evidence from DEST that their bilateral links are largely confined to government-to-government relationships and activities. How do your organisations establish and maintain bilateral links and relationships, and how would you describe them? You said you have an MOU with the Ministry of Education and with the Ministry of Science and Technology. Is there a series of MOUs you have with a variety of not just ministries but agencies and departments?



Ms Bun—Perhaps I could give a framework and Ta-Yan could give you some specifics. At CSIRO, we tend to have very entrepreneurial, bottom-up dialogue in collaboration, led by scientists in particular areas. Through their divisions from time to time they enter into MOUs with very specific agencies in those domains. At a corporate level we have had three engagements. The first, dating back to 1985, was with the Chinese academy, which is a vast organisation. We have had deep exchange over many years around that MOU. More recently, after the JSTC dialogue last year, we embarked on discussions with both the Ministry of Education and the Ministry of Science and Technology. They are now becoming the new umbrella framework relationships for future collaboration. I do think that some of the division-led specific MOUs have been very fruitful over many years.

Dr Leong—For example, our Division of Forestry and Forest Products has an agreement with the China State Forest Administration, under which there are a number of postdoctoral fellows coming to Australia. That has been very productive. It has had a very good outcome.

CHAIR—What was that body called again?

Dr Leong—The China State Forest Administration. Under this particular arrangement we have received a number of postdoctoral fellows from China who came and spent a year or more within CSIRO and produced some very good research results. Earlier on I talked about the arrangement between our Division of Atmospheric Research and Beijing Meteorological Bureau on air quality protection, which will have an impact on the Beijing 2008 Olympics. The Division of Atmospheric Research also has an arrangement with the Chongqing meteorological administration. Chongqing is the capital of the Sichuan province, one of the most populated provinces in China. This bilateral collaboration is to complete research into extreme rainfall and flooding, climate change projects and numerical weather prediction.

Dr Thomas—We have an MOU with the National Natural Science Foundation of China, and we are presently negotiating to have a program of coordinated project proposals with them where Chinese researchers can apply to that organisation for research funding. At the same time, Australian researchers can apply for the same collaborative projects. The Australian Research Council would advertise that as specific to that organisation.

CHAIR—We were talking earlier about the 197 collaborative projects. Would most of those be with other than ministries—that is, are they with agencies or foundations?

Dr Thomas—Mostly, individual researchers or universities are driving that. But the agreement that we are working through at the moment with the National Natural Science Foundation of China would be agency-to-agency driven.

CHAIR—So it is similar to the CSIRO, where it is an umbrella arrangement with the Ministry of Education or the Ministry of Science and Technology. What about the academy, Professor Smith?

Prof. Smith—The academy also has MOUs, but again they flow down to the more tangible collaborations and relationships. The aim behind the new Australia-China symposia series was to encourage more of those. Indeed, after the first one, there were immediately some new collaborations.



I know that the Academy of Technological Sciences and Engineering has had longstanding relationships with China in relation to aspects of engineering, water resources and sustainable energy, which is extremely important. Moving down to the lower level, I have picked up from the DEST submission that there are 400 bilateral agreements between universities in Australia and China, which is a pretty amazing number. I do not know how active they are but I know that in the last few years there are some new ones which are highly targeted, not just shaking hands and then going away.

One of the ones that is mentioned in our submission, which was not one that I am familiar with, is in the area of Antarctic research. There is an MOU between the Polar Research Institute of China and Shanghai and the Australian Antarctic Division and the University of Newcastle in Australia as well. That seems to me to be a very good example of a multiorganisational agreement targeting Antarctica where Chinese and Australians are really very highly linked and collaborative. There are many, many examples. There is one in CSIRO Land and Water, which I know about because it is in the same building as me, which is looking at problem soils, polluted soils in China and some problems in Australia and the salinity issue which we mentioned earlier. MOUs are the starting point but what we then do is to produce the goods by actual tangible collaborations using DEST funding, ARC and the other agencies.

CHAIR—We have had put before us in the submissions and hearings a divide between—to use my words—prosperous eastern China and a less prosperous western China. With the projects and involvement that you have, do you include just China or do you include Hong Kong and Macau? Secondly, are your projects eastern China related—of course, that necessarily reflects what we are told is the prosperous part of the country?

Dr Leong—As Ms Bun indicated earlier on, a large proportion of our projects are in agriculture and these are mostly in the rural areas of China—east, west, north and south—but also in developing areas of China. In fact, some of our projects are funded by the Australian Centre for International Agriculture Research and this is mostly based in rural agricultural areas. The spread of project activities covers almost every part of China—the remote areas as well.

CHAIR—So there is no divide?

Dr Leong—It is a mixture.

CHAIR—What about the ARC, is there nothing discernible that comes up?

Mr Sedgley—I think it is fair to say that the linkages that we support are with researchers throughout China in a range of universities and other research institutes.

CHAIR—Intellectual property protection in China has risen as an issue in this inquiry. Does this impact in any way on the willingness of Australian research agencies to collaborate with Chinese partners? How are collaborative agreement structured to ensure that Australian intellectual property rights are protected?

Prof. Smith—It is a question which is important in the funding of the grants which I am involved in. Indeed, that is one of the specific criteria which have to be addressed: are Australia’s IP rights protected? I am not involved in the sort of science which will ever earn lots of dollars,



so I am really rather an ignoramus. But what has impressed me in reading these applications is that all the applicants are confident that it is okay. It is not a matter of China grabbing Australia’s intellectual property. It might have been once, but they seem perfectly happy that they have agreements. I know the CSIRO have extremely tight IP processes that they have to go through so, to my mind, if the applicants, who are pretty hard-nosed scientists—which you have to be nowadays—are confident then my impression is that it is okay.

CHAIR—Could I ask for your views, Dr Thomas and Mr Sedgley?

Dr Thomas—I do not have a lot to report except that researchers themselves suggest that intellectual property protection is improving in China.

CHAIR—Sorry—is what?

Dr Thomas—Researchers working in this field of intellectual property say that it is being strengthened in China—the protection of intellectual property is something that is rapidly being taken into consideration in universities in particular. So we are confident it is moving in the right direction but we do not have much absolute evidence of it.

Mr Sedgley—One of the conditions that the Australian Research Council places on the funding that goes to universities here in Australia—and is therefore associated with the collaborations between those universities, the researchers and researchers in China—is that the universities have strong, robust intellectual property management policies and processes in place, and that, in circumstances where they are interacting with, for example, companies or firms, they have robust agreements in place with those firms for the management of the intellectual property that might arise from that research.

CHAIR—Thank you. Ms Bun, do you have anything to add?

Ms Bun—Clearly, the depth of our history of collaboration indicates that it is possible to have very rich collaborations. There is no doubt that China is a very dynamic economy, and the institutional framework and the culture around intellectual property does appear to be changing. Their joining of the WTO in 2001, I think, did have an impact on that equation. Having said that, I think it is equally fair to say that there may be a perception amongst CSIRO staff that at an institutional level, at a partnership level, there could be compliance issues, enforcement issues. Perhaps that perception alone has appeared to be something of a barrier around the hard edge of the commercial transactions. It could manifest in a reluctance to participate where there is particularly confidential or sensitive commercial information. Also, I think it manifests—

CHAIR—So this has happened—people have been reluctant?

Ms Bun—Again, it is a perception. I do not want to overplay it, because as I say we have had very deep interaction and collaboration and the situation definitely is improving. So it is interesting—I guess it is not a secret—that that perception exists in business at a global level. I think there is also an appreciation that the situation is changing very quickly, which is a good thing. Because of this it is interesting to note that CSIRO has a reasonably vast asset in intellectual property, developed over many years, and not much of that is actually protected in China, so we have not taken out many patents in the Chinese domain. I do not know if that is



true of the universities as well, but it is an interesting reflection of the consideration one goes through in going to the expense, difficulty and so forth of filing for protection.

We believe that, given these constraints, we are pretty well placed to selectively participate. That means finding the right partners in China and here. It means being very clear about management practices. It means presenting technologies in collaboration in an appropriate manner in that context. Partnering with organisations that have strong intellectual property protection has been an important strategy and will continue to be for us going forward. Yes, it is improving.

CHAIR—I gather! I thank you all very much for coming along this evening.



[7.06 pm]

WILSON, Mr Ken, Assistant Director, Executive and International Affairs, Bureau of Meteorology of Australia

ALLEN, Mr Rodney John, Acting Director, Australian Antarctic Division, Department of the Environment and Heritage

CARRUTHERS, Mr Ian, First Assistant Secretary, International, Land and Analysis Division, Australian Greenhouse Office, Department of the Environment and Heritage

FERRIS, Mr Jason Andrew, Assistant Director, Migratory and Marine Species Section, Department of the Environment and Heritage

GRINBERGS, Ms Helen Mary, Director, International Partnerships Section, Australian Greenhouse Office, Department of the Environment and Heritage

SMITH, Ms Kerry Jayne, Director, International Section, Department of the Environment and Heritage

THAPPA, Ms Nina Subhashree, Policy Adviser, International Section, Department of the Environment and Heritage

CHAIR—Welcome. I invite you to make a brief opening statement, which will be followed by questions from the committee.

Mr Carruthers—I have a few key points. The relationship of the Environment and Heritage portfolio with China is based on our shared recognition of the global nature of environment problems and our directly shared regional and bilateral interests in a range of environment and heritage issues. Those key issues include the relationship in the area of climate change, meteorology, Antarctic affairs, the conservation of migratory birds and cultural heritage. The Environment and Heritage portfolio priorities also link with issues of broader national interest—for example, foreign relations and commercial interests.

The bilateral relationship builds on seven memoranda of understanding and one treaty with China. In the area of climate change, the collaboration is through a memorandum secured in 2004 on climate change activities. It covers areas such as greenhouse emissions, measurement and analysis, agricultural and land management, and the development and implementation of climate change policy issues. In the area of the conservation of migratory birds, we have the 1986 China-Australia migratory bird agreement. This treaty forms the basis of ongoing collaboration in the form of consultative meetings, information exchange and conservation activities.

In the area of meteorology, we have the 1995 memorandum on meteorology. Collaboration exists in the area of meteorological satellites, atmospheric chemistry, Antarctic meteorology, joint research on climate change science, and training of Chinese meteorologists in the lead up to



the 2008 Beijing Olympics. In the area of cultural heritage, there is a memorandum with China on cultural heritage cooperation and we participate in international collaborative projects to develop cultural heritage practices in China. Both China and Australia are signatories to the Protection of Movable Cultural Heritage Act 1986. In this connection, Australia is helping China in the recovery of Chinese illegal fossils which have been seized in Australia.

In the area of Antarctic affairs, there is high-level engagement that reaches back 20 years. Scientific and logistical collaboration activities include research, sharing of information and operational support. These activities occur in the context of three memoranda on Antarctic collaboration. This in essence sums up the portfolio relationship with China. As you will see, it is longstanding, diverse and growing as we move forward. My portfolio colleagues and I are happy to take questions.

Senator SANDY MACDONALD—What priority do you think the Chinese government gives to the challenges it faces with respect to land degradation, clean water and greenhouse gas emissions?

Mr Carruthers—I will perhaps seek comment from my colleagues. My own dealings are more directly in the area of climate change. That does of course bring us into broader areas of sustainability. The China-Australia collaboration on climate change is a very active one. I think it is rooted in a recognition of considerable similarity of circumstances and complementary economic interests. For example, in the area of land management, where it is well known that China is particularly challenged by degradation of the landscape, there is an opportunity for win-win outcomes in China in terms of restoring tree cover, sustainable agricultural management and the like. Australia, with its similarly large land area, diverse climate circumstances and so on has a good deal to contribute. I might say that there is a deal of two-way flow. We have collaboration in areas of agricultural research to do with greenhouse emissions, where indeed there is very much a reciprocal exchange and development of scientific information. So it is clearly of growing importance in China, as they move up the economic development trajectory, that they are paying much more attention to some of these environmental issues. Would my colleagues like to add anything?

Senator SANDY MACDONALD—I was going to come to climate change, but I might go to it now that you have mentioned it. In your submission you state:

The bilateral climate change partnership with China is focused on delivery of practical climate change projects that are of

mutual benefit to both countries.

In January 2000, the then Minister for Industry, Science and Resources signed a new memorandum of understanding with China’s State Development Planning Commission to establish an Australia-China bilateral dialogue mechanism for resource cooperation. Where does this MOU on resource cooperation sit alongside the environmental action plan between the Department of the Environment and Heritage and the State Environmental Protection Administration of China?

Mr Carruthers—In large measure, they are handled separately with the Chinese administration. The climate change agreement is handled with the National Development and



Reform Commission. China has worked increasingly hard in recent years to bring a whole-of-government perspective to the climate change issue.

Indeed, the National Development and Reform Commission is quite a powerful institution in the Chinese government at the present time and it is a very effective point for us to deal with on collaboration. The broader environmental activities, as you point out, are really with the environment protection organisation, SEPA. There is not a lot of connection between them.

Senator SANDY MACDONALD—Is there a tension between the bilateral activities of Australia and China concerning the use of energy sources and the environment?

Mr Carruthers—I do not see that, no.

Senator SANDY MACDONALD—China is the world’s largest coal producer and the second largest exporter, as well as being the world’s largest consumer of coal, with the electricity sector as the main consumer. Do you work with the Department of Industry, Tourism and Resources to promote the efficient and clean use of energy sources in China?

Mr Carruthers—Yes. The approach to China in relation to climate change activities from the Australian end is on a whole-of-government basis and we operate interagency mechanisms to ensure that we achieve that. So, for example, when we undertake discussions with our Chinese counterparts we invariably have the Industry, Tourism and Resources portfolio represented, and indeed they are taking the lead in some areas of the collaboration with China.

Senator SANDY MACDONALD—Could you outline a particular project or the nature of the cooperation—the measures you have taken towards the goal of more efficient and cleaner use of energy sources?

Ms Grinbergs—Some of the activity that we have under way at the present is to do with renewable energy. There are some particular opportunities coming up in China with the electrification of regional areas and opportunities to export Australian expertise and technologies as a result of that. We have had some negotiations with the Chinese government on projects on that front, and particularly on opening up the market to Australian renewable energy companies.

On the coal side, there is an Australia-China coal mission that is coming to Australia in the next month. Our colleagues from ITR will be able to speak more about that a bit later, but we have been involved in that process as well. And, in particular, there are some opportunities there associated with the capture and use of coalmine methane to generate energy and also reduce greenhouse gas emissions as a result. We are looking at a number of projects to invest in technologies on that front and opportunities, again, for Australian businesses to export their technologies and expertise to project opportunities in China.

Senator SANDY MACDONALD—Have you found that there is an exchange of technologies—is it more in Australia’s favour or more in China’s favour?

Ms Grinbergs—At this point we are very much at the early stage of these processes and negotiations. This is only the second year of the partnership. At this point it is really more of a



facilitatory aspect of identifying where the project opportunities lie and where Australian expertise might be able to be used.

Senator SANDY MACDONALD—Somebody mentioned the problems of business copyright and the protection of intellectual property. Was it you who mentioned it?

Mr Carruthers—No.

Senator SANDY MACDONALD—In August 2004 the Minister for the Environment and Heritage, Ian Campbell, stated that Australia is working with China and other countries to take real action to combat climate change. He gave the example of a project that will explore how Australian and Chinese farmers can reduce greenhouse gas emissions and develop farming systems appropriate to changing climate. What contributions do farming systems make to greenhouse gas emissions relative to those emissions from industry generally?

Mr Carruthers—In China?

Senator SANDY MACDONALD—Yes.

Mr Carruthers—I am afraid I could not quote you that number off the cuff. However, we would be very happy to get that information for you. Clearly, it is quite significant, given the land area of China and the reliance of much of rural China on agriculture as the basis of rural life and in terms of feeding their growing urban populations—particularly with a focus on, for example, rice production, which is a significant source of methane emissions, as other agricultural activities are a source of emissions. In terms of the removal of tree cover, which they are seeking to turn around, and degradation of soils, there is an associated loss of carbon from the landscape. So it is quite a significant area for them.

We recently concluded an agreement with China for a major project with consortium funding from Australia and with funding from various Chinese institutions to look at the sustainable and efficient use of fertiliser in Chinese agriculture. That is being organised through the Australian agricultural international investment—

Senator SANDY MACDONALD—Did you say the official use of fertiliser or the unofficial use of fertiliser?

Mr Carruthers—Through the use of fertiliser.

Senator SANDY MACDONALD—When you are getting that information about the contribution that farming systems contribute to greenhouse gas relative to emissions from industry, could you provide any further information on the project—for example, the Australian agencies involved and the extent and nature of engagement between Australians and Chinese working in the fields?

Mr Carruthers—Yes.

Senator SANDY MACDONALD—In August 2004 the Minister for the Environment and Heritage, again Ian Campbell, stated:



To build on the good relationship that already exists, officials and several Australian companies will be meeting with their

Chinese counterparts in Beijing ... to identify further opportunities—

clearly in regard to the Australia-China Bilateral Cooperation on Climate Change—

particularly with a business focus.

Could you clarify what is meant by the phrase ‘with a business focus’?

Ms Grinbergs—That essentially alluded to the second Australia climate change workshop, which was held in Beijing in September 2004. It included a strong industry segment which provided not only the opportunity for companies to meet with Australian and Chinese senior government officials but also the chance to meet with relevant Chinese companies to discuss potential collaborative projects for development under the partnership. Twelve Australian companies, predominantly representing the renewables industry but also the refrigerants and coal industries, participated in our workshop. At this point two projects that have come forward out of that workshop are being developed jointly with our Chinese counterparts and are being considered by both governments for inclusion under the partnership. A number of other projects dealing with lighting efficiency, standards and, as referred to earlier, nitrous oxide emissions from fertiliser use, and other projects are also being considered for inclusion.

In May this year we hosted a delegation of officials from the Chinese Renewable Energy Industry Association, again to discuss potential collaborative projects, to identify opportunities for Australian renewable energy companies in China and to increase the exchange and trade in renewable energy technologies between the two countries. Out of those discussions a further three proposals have been put forward for consideration by both governments. They include business models for remote area power supply; low-energy, low-emission building design and standards in China; and a large-scale photovoltaic plant in China. Again, as I referred to earlier, we are looking forward to the visit of Chinese officials associated with the Australia-China Coal Summit and opportunities to engage with them on coalmine methane in particular.

Mr Carruthers—Let me put that into context. In the climate change collaboration between Australia and China there is a very strong focus on practical activities. It is through the business focus that we can very much magnify the practical focus of engagement with China. There is a lot of expertise within Australian industry in this area, so they are very much working in partnership with Australian government agencies in taking this agenda forward with China. Of course, Australia does have a mind to the potential for commercial opportunities. As you highlighted before, this is an area of increasing focus and priority in China, so it presents opportunities for commercial engagement.

Senator SANDY MACDONALD—Do Australian and Chinese agencies share an almost identical view of the problems and agenda of climate change?

Mr Carruthers—China has a quite sophisticated understanding of climate change science. Perhaps Mr Wilson would like to comment about his perceptions of the state of climate change scientific capability in China. My own sense is that China is quite an advanced nation in terms of scientific sophistication. China is very much exposed to the effects of natural climate variability. We have just been reading in the last week or so of yet another major flooding episode in China;



they are subject to typhoons and the like. So the potential of a future change in climate and the impacts of that on China are quite well understood in the Chinese government. They perhaps have a particular focus on the question of response, as a developing country, where they see a particular need for poverty alleviation and for economic development. As I mentioned in the introductory comments, our discussions with China on the policy front are very much about how China can play an increasing part in global engagement and the global solution to the threat of climate change.

Senator SANDY MACDONALD—In your submission you mentioned a number of MOUs and similar arrangements. Can you identify any positive outcomes from these memoranda of understanding? Are there any other details that you might like to bring to the committee’s notice? Perhaps you could make a case study of how things have operated under one of these MOUs.

Mr Wilson—Perhaps I could cite one example of a benefit to Australia under an MOU. The bureau has had an MOU in place since 1985. One of the areas of fairly constant activity has been satellite meteorology. Under that sort of arrangement Australia now has access to geostationary meteorological satellite data from the Chinese geostationary satellite, which provides cloud imagery of the type that you see on your television sets at night.

Senator SANDY MACDONALD—Which one do we use for the BOM?

Mr Wilson—That is the Japanese one.

Senator SANDY MACDONALD—That is a new one is to be switched on, isn’t it?

Mr Wilson—It is about to be switched on. It is transmitting in trial mode at the moment. It has not been declared operational as yet. Probably late this month or early next month that might be operational. However—

Senator SANDY MACDONALD—Sorry to interrupt, but this is a particular interest of mine, being dependent on it in my other life. What is the difference between the existing one and the new one?

Mr Wilson—The existing one has not really worked properly for some time now. We have been using a US satellite that has been moved over to our longitudes, because the previous Japanese satellite has been up there much longer than planned because of a launch failure with its replacement. The new one will give more data than the old one provided. Again, for the geostationary imagery that we get, it will also provide more quantitative information that we can use in other ways. The Chinese satellite is a geostationary satellite—an imagery based satellite. In a sense it provides a backup; it is at slightly different longitudes. It, Fengyun 2C, is producing imagery at the moment. It is essentially available to us as a backup in case anything goes wrong with the Japanese or American satellites.

We provide a turnaround ranging station, which is located down at Crib Point in Victoria, to help stabilise the orbit of the Chinese satellite. As well as that we have a number of research programs which are based on the data that flows from that satellite, so that we can use that information more quantitatively in numerical weather prediction models to try to improve the



quality of the forecasts; for example, tracking the movement of cloud vectors as a surrogate wind observation. Those sorts of programs are operational at the present time.

Senator SANDY MACDONALD—Do geostationary satellites have to be constantly stabilised?

Mr Wilson—Pretty much, yes. We also have a turnaround ranging station for Japanese satellites.

Senator SANDY MACDONALD—Is that an expensive contribution that we make? Who pays for it?

Mr Wilson—In the overall scheme of things, no, it is not terribly expensive. The value of the geostationary satellite might be of the order of $30 million, and our contribution annually might be more like $30,000—so we are well in front.

Senator SANDY MACDONALD—Does Australia have similar MOUs with other countries? If so, is there anything particularly unique about the arrangements that we have with China?

Mr Wilson—In the case of the Bureau of Meteorology we have, I think, 10 MOUs, with countries such as Korea, the Russian Federation, Iran—quite a range of countries. A number of the MOUs are aimed fairly squarely at making sure we stay in the satellite meteorology game. Korea is again active in the development of meteorological satellites. They are planning to launch satellites in 2008, so that is a particular focus. The Chinese MOU is perhaps one of the more active we have. We have an MOU with India, for example, which is relatively inactive. The Chinese one has been, over a period of years, quite active, and it continues to be so.

Senator SANDY MACDONALD—Why do you think it is more active than India? India’s weather is possibly more relevant to Australia.

Mr Wilson—There are a lot of similarities with China’s weather. For example, one strong area of collaboration has been the area of tropical meteorology—we both experience tropical cyclones or, in their case, typhoons. We are both affected by monsoon circulations. Those sorts of areas of study have been fairly common. We both have large land masses; we both experience drought—there are quite a number of similarities. Under the World Meteorological Organization—a UN specialised agency which most countries belong to and are represented at by their national met services—China has had a long history of cooperation in the free exchange of information and products. So we exchange data and observations—as we do with most countries around the world. Australia may have been one of the early countries to show an interest in China, in meteorology at least, and to send scientists there to train their scientists. We are probably now reaching a point where that situation is about to reverse. I think probably 10 or 20 years ago it was not uncommon for their scientists to come and work with our scientists for about six months at a time, but now the visits are much shorter. They are probably becoming world leaders in some areas and we are starting to learn from them in areas such as satellite processing and so on. Their met service has a staff of some 55,000; we have 1,300 or something like that. So it is fairly inevitable that, as long as they continue to invest at that sort of level in their national met service—



Senator SANDY MACDONALD—Do they have some particular climate predictability factors like we do? For instance, the SOI is obviously very relevant to the weather in eastern Australia. It is one of the predictability factors and the El Nino is another predictability factor that we use. Do they have similar things that happen that they use?

Mr Wilson—I am not sure what they use for seasonal climate prediction in China—what tools or techniques they apply.

Senator SANDY MACDONALD—It is interesting. In your submission, Mr Carruthers, you mentioned that your department has been participating in an international collaborative project with the Getty Conservation Institute, to help develop cultural heritage practice in China. In some ways it is rather like taking coals to Newcastle, because my understanding of the Chinese government is that they have a very keen appreciation of their cultural heritage. Could you explain the reasons behind this project and what its objectives are?

Mr Carruthers—We do not have anybody here tonight from the cultural heritage area. Our collective knowledge is pretty much in the territory of what is set out in the submission. I will not chance my arm beyond that. We would be happy to respond.

Senator SANDY MACDONALD—If there is something further to be said on that, we would certainly like to hear from you.

Mr Carruthers—We would be happy to do that.

Senator SANDY MACDONALD—In your submission you mentioned a number of joint activities, including the conservation of migratory birds, Mr Ferris’s area of expertise. Could you describe the way in which these joint activities contribute to building better overall relations with China? Mr Ferris, I would be particularly interested to hear about the migratory birds. The swallows that nest on my veranda come from a long way away, up in that part of the world.

Mr Ferris—The majority of our activities focus on a different group of birds. The most numerous migratory birds in our flyway, which extends down from Alaska and Russia through East Asia to Australia, are migratory shorebirds, like curlews, snipes and so forth. We have something in the order of five million of these birds in the flyway, making this annual migration backwards and forwards. Some two million of those arrive in Australia, the others stopping a little further north. The vast majority of them stop en route while they are migrating in both directions in the Yellow Sea region of China. As we have heard, there are substantial human development impacts, particularly in that region of China, with agriculture and so forth. The habitats for these birds are really quite threatened. In the context of our migratory bird agreement, we have been engaging in a range of activities to increase recognition of those important places for migratory shorebirds. That has involved a 10-year program of surveying birds in the Yellow Sea during northward migration. The Yellow Sea is the area bounded by the Korean peninsula and around the east coast of China. It is an enclosed area that has a huge tidal range and massive areas of mudflats, many hundreds of thousands—

Senator SANDY MACDONALD—It has been subject to land reclamation and things like that, which means that their habitats have been destroyed?



Mr Ferris—That is correct. Also, the changes in upstream uses have greatly affected the rate of siltation and deposition in the Yellow Sea, which affects the habitat. We have been working directly with the Chinese government—principally with the State Forestry Administration, which is the lead agency for the CAMBA agreement—to undertake a range of activities that involve identifying and recognising important places and training those officials responsible for managing those places in shorebird identification and increasing their participation in migration research. We are trying to increase the profile of those birds. We have also, through a non-government partnership with Wetlands International, who have an office here and in China, funded more of those types of training and awareness raising activities, to increase the profiles of those elements of Chinese biodiversity.

Senator SANDY MACDONALD—Since you have been doing this project, have you noticed an increase or a continuing fall off in the number of migratory birds?

Mr Ferris—In terms of the changes in populations, one of the great challenges with these species is getting an idea of trends. It is very difficult to do. There is an intensive program in Australia, counting the birds. At the moment, we have funded a project with the Australasian Wader Study Group, to review their count data and look at the trends that are emerging. I suspect that for some species there is a slight decline occurring. On the whole the populations are stable at present, but with the scale of development impact that is occurring we are anticipating further declines.

Senator SANDY MACDONALD—Why do you think—perhaps there is evidence of it—that disease is not brought in by these migratory birds?

Mr Ferris—Do you refer to things like avian influenza?

Senator SANDY MACDONALD—Yes.

Mr Ferris—I suspect that it is possibly part of the biology of those birds in particular and the way that they are moving around. It places a very high level of pressure on an animal, and if it is carrying any disease load it would not survive migration. They are certainly nowhere as susceptible to non-pathenogenic diseases as the ducks and geese in North Asia are. We have heard in the media of avian influenza being linked to those species of wild birds. There are very low levels of that type of disease detected in shore birds, and it is usually detected only when they are in close association with wild ducks.

Senator SANDY MACDONALD—Is there an active exchange program of students, academics or officials in these areas of joint cooperation—joint activities?

Mr Ferris—As part of the survey program that I mentioned and as part of the other training activities, we have hosted a number of delegations of officials from China. We have also provided support for Australian experts to visit China and provide on-the-ground demonstrations of their training techniques and bird capture and handling techniques. Yes, there is an active program. It operates at a reasonably low level, I guess, considering the number of people involved.



Senator SANDY MACDONALD—There are numerous government departments and agencies working on various aspects of Australia’s relationship with China. Could you explain whether there is one designated department that coordinates or oversees these activities to ensure that they complement each other and that there is a free flow of information between them?

Mr Carruthers—As I touched on before in the area of the environment, we have a number of interagency processes. In particular, the Department of Foreign Affairs and Trade is actively involved. To take the example of the climate change partnership exchanges, the department of foreign affairs works with us in planning and priority setting and the areas and directions of engagement. The department of foreign affairs facilitates access to the Chinese government on a regular basis. I think you would find similar roles of the department of foreign affairs and interagency processes on other fronts.

Senator SANDY MACDONALD—Do you have officers in the department who have Chinese language skills?

Mr Carruthers—Only incidentally. It is a lucky strike when we do.

Senator SANDY MACDONALD—Quite—or have studied Chinese society, culture or heritage with a particular academic bent?

Mr Carruthers—Certainly, when our officials travel to China, they receive some briefing on Chinese cultural features. We are very fortunate in the case of the Australian Greenhouse Office in that our deputy secretary is a former foreign affairs ambassador, so he is well acquainted with this. Many of our people have quite extensive international experience in dealing with different cultural situations but we try to broaden the opportunities for understanding by our people there.

Ms Smith—In the past we have run cross-cultural awareness training for people in the department who deal with a number of different countries. We are running one in July that will cover China as well.

Senator SANDY MACDONALD—How many people from your department have travelled to China in the last couple of years? Similarly, how many Chinese officials have visited Australia in the last couple of years?

Ms Smith—It would be hard to give you a figure.

Senator SANDY MACDONALD—In the broad?

Ms Smith—We have a number of visiting delegations, certainly from China, and a number of officers travel to China as well, but that could be incidental because a meeting is being held in China; it may not be to hold bilateral discussions.

Senator SANDY MACDONALD—What about you, Mr Ferris, how often do you go to North Asia?

Mr Ferris—We tend to try to roll all our meetings into one trip a year. We had a trip to Korea last year, when we held some bilateral discussions with Japan and China and held multiparty



discussions. We have been invited to attend the next round of meetings for the China-Australia migratory bird agreement in November or December this year. That will be my first trip to China.

Ms Smith—It is probably fair to say that the engagement is more active from the Chinese side. They quite often get funding to send delegations to other countries to learn from their experiences, and they certainly use that with Australia as well.

CHAIR—Thank you for coming along. You might be used to late committee sittings—particularly you, Mr Carruthers—with estimates hearings going into the evenings. On behalf of committee members I express my gratitude to you. The fact that there are only two of us here does not mean that other committee members are not around—they are probably in their rooms watching the proceedings on telly, with a cup of tea or probably something stronger! But we are here and I thank you all for coming along.

Committee adjourned at 7.47 pm

commonwealth of australia official committee hansard · (a) australia’s economic relationship...

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