Bills: Customs Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019, Customs Tariff Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019 - Second Reading

25 November 2019

Senator Patrick: The Customs Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019 is to give effect to Australia's obligation under the three free trade agreements signed by the coalition government over the past two years. We have the Peru-Australia Free Trade Agreement, the Indonesia-Australia Comprehensive Economic Partnership Agreement and the free trade agreement between Australia and Hong Kong and China. Various FTAs have individually come before the parliament over the past decade. Towards the end of the previous parliament, many of you would remember, we had already dealt with the Trans-Pacific Partnership, TPP-11, legislation. Such is the industriousness of our free trade negotiators that we now get to deal with three more FTAs as a job lot.

At the outset, I would underline that Centre Alliance supports free and fair trade. I need to state that upfront. We want to see the maximum opportunities for our exporters. We are a trading nation. Our future lies in engagement with the world. However, we are also mindful that our trade agreements must support our broad national interests, especially Australian manufacturing and our ability to value-add to our raw materials, and energy exports. Our FTA must also protect Australian jobs and living standards, our health and welfare safety nets and environmental standards. Our trade agreements must also preserve and not erode Australia's sovereign decision-making capacity in relation to key economic and social objectives.

We are pro trade, but each FTA should be looked at on its individual merits with independent analysis of the costs and the benefits. All too often these agreements have been negotiated in secret with inadequate transparency. They have been signed and sealed by the Australian government with insufficient analysis and consultation. And the benefits of these agreements are contested. As I and my predecessor, Senator Xenophon, have pointed out, in its last major study of FTA impacts in 2010, the Productivity Commission found the predictions on growth and jobs for FTAs had been exaggerated or not demonstrated and that the opportunities, costs and negative impacts on employment had not been properly considered. Each time an FTA is presented to the parliament, the government of the day froths with enthusiasm about the claimed benefits but then fails to commission and present to the parliament an independent rigorous analysis or any economic modelling. Nor is there any rigorous independent examination of the performance of FTAs after they have been ratified and put into operation.

In previous debates on FTAs, Centre Alliance has expressed a longstanding concern about investor-state dispute settlement, ISDS, arrangements, which have become standard features of free trade agreements. Australia has already had a negative experience with ISDS when Philip Morris, having failed to overturn legislation in relation to plain tobacco packaging in our highest court, in the High Court, went to Hong Kong and initiated action against the Australian government under our 1993 trade agreement with that territory. I supported the Australian government in defending the matter, but nonetheless that particular ISDS litigation cost the Australian taxpayer at least $39 million. The government wasn't upfront in providing the parliament and the people of Australia with those particular details. Former Senator Xenophon and I fought for a couple of years to get access to how much had been spent, through the FOI process, and the parliament officials refused to answer questions, such was the government's embarrassment about the numbers. It went all the way to the Administrative Appeals Tribunal. Finally the government realised they were going to lose the exemption case, and the number was revealed—$39 million.

We need to understand that the ISDS provisions entitle large corporations to sue governments, should they be affected by changes in public policy. We need to understand that we have a situation—and I accept that ISDS will protect Australian businesses overseas from changes in foreign policies of foreign countries, but it is the Australian taxpayer that picks up the premium. We get to pay in circumstances where the Australian government is sued such that our companies are not subject to that risk. So it's large corporations that the Australian taxpayer is underwriting. We are shifting the sovereign risk from those companies to individual taxpayers. Interestingly enough, Australian companies can't use these provisions here in Australia, so in some sense they even discriminate against Aussie companies that may wish to invest here rather than overseas. They have no recourse other than through our court system.

The government says, 'Well, ISDS—that was a single case in litigation, and Australia won.' But there's no shortage of examples internationally in which very large companies have used ISDS in efforts to bludgeon governments and pursue changes to policies that such corporations perceive as adverse to their commercial interests. One notable example is the international arbitration claim brought by a Swedish energy company, Vattenfall, against Germany in relation to that country's decision to phase out nuclear power. Vattenfall is seeking 4.7 billion euros—that's A$7.63 billion—in damages from the German government for the closure of two nuclear reactors. That case began in 2014 and still has a long way to run.

I move to the second problem area with the current arrangements, and that is labour market testing. This has already been a significant problem in free trade agreements that have previously come before the parliament, and we've already created a situation in which foreign companies can bring in workers and don't have to test the local market to see if there's an Australian here that can do the job. The failure to include labour market testing requirements has unquestionably opened the door to an erosion of employment opportunities, job security, wages and conditions for Australian workers.

Those problems have been highlighted by Centre Alliance, by the Australian Greens and, indeed, by the Labor Party, which in opposition in the past has expressed considerable reservation about free trade agreements the government has presented to the parliament. Just over a year ago, in the 2018 debates on implementing legislation for the TPP agreement, Labor expressed significant concerns. A number of Labor senators did not vote for the bill; they abstained. There were signs then, however, that Labor was shifting position. At the time, Centre Alliance moved an amendment that required that the provisions of that bill not commence unless the Australian government exchange bilateral side letters with the other parties to the treaty, agreeing that the ISDS provisions would not apply in relation to an investment in Australia by an investor of the other party, as well as side letters agreeing labour market testing must occur in relation to contractual services suppliers entering or proposing to enter Australia from the other party. That proposed amendment was not supported by the coalition, but it was also not supported by Labor.

Today it is clear that Labor's position has moved much closer to the coalition. Indeed, the parliament's consideration of these three FTAs confirm the new bipartisanship between Labor and the coalition on trade policy. As senators will be aware, JSCOT has recommended ratification of the three new FTAs. Coalition and Labor members of that committee were in broad agreement. Labor's JSCOT members further recommended that:

… the Australian government negotiate with the Peruvian Government to withdraw the proposed ISDS arrangements … as there is no clear benefit to such mechanisms, they bring well-established and serious risks …

In its report on the agreements with Indonesia and Hong Kong, JSCOT as a whole recommended that:

… the Australian Government gives due consideration to implementing … independent modelling and analysis of a proposed trade agreement … by the Productivity Commission … provided to the Committee alongside the National Interest Analysis (NIA) to improve assessment of the agreement.

Labor JSCOT members further recommended that:

… the movement of natural persons, as referenced in Chapter 12 of IA-CEPA, only occur on the basis that any temporary foreign labour arrangements include the application of labour market testing and actual skills testing in relevant areas like electrical trades, and notes that this should in any case be a treaty-level agreement.

Note the last part of that recommendation: labour market testing should be locked in by a treaty-level agreement. That's what they said at JSCOT.

Behind the JSCOT process, however, the Labor opposition had been negotiating with the government. On 21 October, Labor leader Mr Anthony Albanese announced that Labor would support this bill on the basis of undertakings given to the opposition by the trade minister, Simon Birmingham. These undertakings include a commitment that there will be no new labour market testing waivers and that future FDAs will not change Australia's workplace laws here. The government will, apparently, bring forward new legislation to introduce criminal penalties for the worst forms of worker exploitation. New measures will be introduced to ensure working holiday-makers are not exploited and are qualified for the work they undertake. The ISDS mechanism in the new agreement with Indonesia will be reviewed as part of the five-year review of that agreement. Existing ISDS mechanisms in other FTAs will be updated, where possible, to include what are described as 'modern, stronger safeguards'. JSCOT will also conduct another inquiry into all aspects of Australia's treaty-making process.

These undertakings from the government are welcome; however, they don't adequately address the concerns held by Centre Alliance, nor, for that matter, concerns previously expressed by Labor and still held by the trade union movement. The ISDS arrangements remain, subject only to some form of review at a future date. Labour market testing is not locked in through any treaty agreement. You're working on trust here, Labor. We saw what happened with the encryption bill when you worked on trust. In this regard the reaction of the Australian Council of Trade Unions, after Mr Albanese announced Labor's new position, is worth noting. The ACTU observed:

The agreements were negotiated in secret and have never been subjected to any form of independent assessment of their economic benefit or to determine whether they are likely to deliver or support jobs for Australian workers.

They will increase the number of workers on temporary visas in this country at a time when the 1.4 million already working here are routinely exposed to exploitation.

They do not guarantee that jobs will even be advertised locally before they are filled by workers on working holiday or training visas.

The agreements contain Investor-State Dispute Settlement (ISDS) clauses …

…   …   …

The ALP has extracted some concessions from the Government not contained in the agreements but has still voted to support agreements which do not meet the standards set out in the party platform.

…   …   …

The ALP is in breach of its own platform, which represents the commitment it has given to its members and Australian workers. To vote in favour of agreements which do not have labour clauses and include clauses which compromise Australia's sovereignty is deeply disappointing.

That is from your own ACTU.

To give Labor the opportunity to clearly register its new position on free trade agreements, Centre Alliance has circulated an amendment which is in the same terms as that moved by the Australian Greens in the House of Representatives, which in turn adopted the approach taken by Centre Alliance's proposed amendments to the TPP legislation last year. That amendment provides that the provisions of the bill should not take effect without Australia and other FTA parties agreeing on side letters providing that ISDS provisions do not apply in relation to an investment in Australia by an investor of the other party in Australia, and similarly that side letters must provide that labour market testing must occur in relation to contractual service suppliers, working holiday visa holders and training visa holders entering or proposing to enter Australia from the other party. This is a much more robust approach to these key issues than Labor's reliance on the government's non-binding undertakings in regard to labour market testing and some eventual review of ISDS provisions.

Because the Greens have moved an amendment in identical terms, I can advise the chamber that I don't intend to move the first of Centre Alliance's amendments, but we will be supporting the Greens amendment. That leaves one set of amendments that Centre Alliance will in fact move, which will insert a schedule into the bill to amend the Productivity Commission Act 1988 to require the Productivity Commission to inquire into the contribution of Australia's bilateral and regional trade agreements to reducing trade and investment barriers; and the impact of trade agreements on trade flows, investment returns and productivity growth, employment and labour markets, and the development of manufacturing and value-added export industries.

The need for rigorous and independent review of Australia's free trade agreements is clear. The last Productivity Commission inquiry was nearly a decade ago. At that time Australia had signed and ratified six FTAs. Since then, we have signed and ratified six more, including the TPP. We have three more FTAs before the parliament today, and the Department of Foreign Affairs and Trade lists another seven agreements under negotiation. There's also the prospective post-Brexit negotiation of the Australia-United Kingdom FTA.

JSCOT has recommended that individual new agreements be subject to review by the Productivity Commission. However, we clearly need a broad inquiry, independent and informed by the full range of expertise, to look at the big picture of our existing FTAs and their impacts and what the future holds in an uncertain international trading environment. Centre Alliance's amendment will set such an inquiry in train.

In closing, and moving to an important issue again relating back to the amendment that was circulated by both Centre Alliance and the Greens, one of these free trade agreements relates to the troubled Chinese territory of Hong Kong. Hong Kong is an important trading partner, as suggested by Senator Keneally. It's also in the midst of great turmoil, and the territory's political future hangs in the balance. The very strong showing of pro-democracy campaigners in Hong Kong's district council elections is a very welcome development and should encourage the Hong Kong administration and the Chinese government in Beijing to respect the territory's special status. But the situation remains fraught with danger. In these circumstances, ratification of the Australia-Hong Kong Free Trade Agreement would be imprudent and ill advised until such time as Hong Kong's political situation is settled in ways that are consistent with a respect for human rights, the rule of law and the letter and spirit of the 'one country, two systems' principle agreed in the 1984 Sino-British Joint Declaration on Hong Kong. I'm personally saddened by the events that are taking place there, having been in Hong Kong on the day of the handover.

Both Houses of the US Congress have now passed a bill that would require the US Secretary of State to annually certify whether Hong Kong is sufficiently autonomous to justify being treated differently from China on matters like trade. In the event that this parliament does pass this bill, the government would still be well advised to put Australia's agreement with Hong Kong on the shelf until the current turmoil is resolved in a satisfactory way. To do otherwise would be foolish and send the wrong political signal to Beijing.

Business: Senate Temporary Orders
18 June 2020
Senator Patrick: I rise to indicate that Centre Alliance won't support the suspension, in the interest of the orderly conduct of business.
Read More
Motions: South Australia Tourism
18 June 2020
Senator Patrick: I seek leave to add Senator Griff's name as a co-sponsor to Senator Di Natale's motion No. 694?
Read More
Questions without Notice: Food Labelling
18 June 2020
Senator Patrick: My question is to Senator Colbeck, in his capacity as health portfolio minister and the chair of the Australia and New Zealand Ministerial...
Read More