Thursday, 13 September 2018
Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Bill 2018, Customs Tariff Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Bill 2018; Second Reading
The Trans-Pacific Partnership, or TPP, is not a quality agreement. Unless its significant flaws can be addressed, I and my colleagues in the Senate cannot support the Customs Amendment (Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation) Bill 2018 and related bill when they go to the Senate. Australia has long been a trading nation. The greater proportion of our wealth and standard of living have been generated by having access to export markets for products in which we excel and reducing the barriers to import to benefit Australian consumers and businesses that import intermediate inputs.
I might just say as an aside that you can have all the free trade agreements in the world, but my growers have a challenge once we access those markets because it is prohibitively expensive for small farmers to access international markets, and then there are non-tariff barriers to trade, particularly around biosecurity, that make it incredibly difficult to access. We have been fighting in my community to be recognised as a pest-free area for a long time, and I've got to say government is absolutely deaf on this. I will say that they have given the Tasmanian government a lump of money to address fruit fly issues in Tasmania, but South Australia has been lost in this. We are the mainland state that has always been considered fruit fly free. Anyway, I digress.
Centre Alliance support the principles of free trade, but we do not support the principle of preferential trade. Despite the badging, the TPP is a preferential trade agreement, not a free trade agreement. Layer upon layer of bilateral preferential trade agreements have created this so-called noodle bowl that spans the Indo-Pacific, adding deep complexity and economic-modelling challenges that simply cannot be untangled. In short, it can be hard to quantify the benefits of a bilateral approach to trade, as the so-called Australia-US Free Trade Agreement—actually a preferential free trade agreement—so aptly demonstrates.
According to a 2015 investigation by Dr Shiro Armstrong, of the Australian National University, 10 years of data on the effect of the Australia-US Free Trade Agreement concluded:
The evidence from a large panel dataset using the gravity model of trade deployed by the Productivity Commission suggests that Australian and US trade with the rest of the world fell—that there was trade diversion—due to AUSFTA after controlling for country-specific factors. Estimates also suggest trade between Australia and the United States fell in association with the implementation of AUSFTA—also after controlling for country-specific factors. The existence of trade diversion suggests that trade between Australia and the United States could well have fallen even further without AUSFTA. These results add to the evidence about whether or not preferential trade agreements increase net trade—with the body of evidence currently suggesting that they do not and if anything lead to a contraction.
Let's decode that dense conclusion for a moment. The Australia-US FTA led to trade diversion rather than trade creation, meaning that it resulted in trade being diverted from more efficient exporters and towards less efficient ones. Although we may have traded more with the US than we otherwise would have, the overall trade flows between our countries did not increase as a result of the agreement.
However, the most damning conclusion is that the current body of evidence suggests that preferential trade agreements do not increase net trade and likely lead to a contraction in net trade. I'm not cherry-picking my academics here; even the initial forecast benefits by Australian academics of the Australia-US Free Trade Agreement were low, in the range of an increase to Australian welfare of $44 million to $127 million. That may sound like a lot but not when you realise that the Australian economy is over $1.3 trillion in size. The study commissioned by the Department of Foreign Affairs and Trade while it was negotiating the Australia-US agreement, which forecast billions of dollars of benefit, was famously described by famed economist Ross Garnaut as 'not passing the laugh test'.
Our starting point in assessing the TPP is that there is not necessarily a strong track record of success with preferential trade agreements, even with a major trading partner such as the United States. However, we can take some solace that megaregional agreements like the TPP are less likely to impose costs from trade diversion. At the global level we have seen that the 'nothing is agreed unless everything is agreed' formulation of the World Trade Organization's Doha round has failed. In an increasingly multipolar world, with President Trump leading the charge against global economic integration, Australia cannot rely on the larger economies to work towards the mutually beneficial win-win outcomes of the past.
Centre Alliance thus supports the principle of megaregionalism in trade. We initially held some hope that the TPP could end up being a quality agreement. Yet it is now apparent that the economic benefits, whilst solid, are not tremendous. The costs to Australia's sovereignty and workforce are simply too great.
On the benefits: to my knowledge, the Australian government have not commissioned detailed independent modelling of the economic benefits expected to accrue specifically to Australia. Instead they are relying upon studies that assess the TPP in its entirety, such as the study by renowned professors Peter Petri and Michael Plummer, which was published in January 2016 when the United States was still part of the TPP. The broad conclusions of that study likely still hold, but the detailed country-specific analysis should still have been undertaken before the parliament could be expected to vote on this enabling legislation. Centre Alliance have asked the government for this analysis, but we have yet to receive it. This appears to be because the analysis has not even been done. The Petri-Plummer analysis estimated that the Australian economy stood to benefit by $15 billion by 2030. The report commissioned by Australian industry groups and authored by the same academics concluded that the benefit to the Australian economy would, with the exit of the United States, be reduced to $12 billion by 2030. This is significant and substantial but not overwhelming compared to the size of the Australian economy.
Now to the costs. The most notorious concern is the investor-state dispute settlement clause. This grants unprecedented power to corporations to sue national governments, and it will undermine our democratic sovereignty. As I have indicated before in this place, that sovereignty stems from the will of the Australian people, and it should not be diminished or delegated lightly.
Australia has been the canary in the coalmine in the Philip Morris case, where the cigarette giant used an obscure clause in the 1993 Hong Kong-Australia trade agreement to sue the Australian government over its plain packaging laws, laws that were overwhelmingly supported in our democracy. Australia ultimately defeated Philip Morris in that case, spending more than $39 million in the process, which was only revealed through the sustained utilisation of freedom of information laws by my former colleague Senator Nick Xenophon and my current colleague Senator Patrick. I think Australians are deeply opposed to the possibility that foreign corporations could overturn the sovereign will of the people and pay huge amounts of money to lawyers to retain that privilege. This is not democracy. We should not be bargaining away our right to self-determination to companies with the deepest pockets.
Another great area of concern and unknown costs to the TPP are the provisions that waive market labour testing for contractual services suppliers. Quoting the additional comments from the Labor Party in the joint standing committee report on the TPP, more than 450 professions could currently be covered by the term 'contractual service supplier' which includes electricians, plumbers, carpenters, nurses. No other country has provided Australia with such generous reciprocal visa rights, and it is unclear why such concessions would be given by our government. Yet the Labor Party are waving this legislation through the parliament on the promise that they will fix things after. However, I don't believe that that can be defended as a proper position of process either in government or in opposition.
The effects upon labelling, especially Australian made type food labelling, also remain an open question yet to be fully resolved. I listened to the member for Shortland, and I hope that Labor will work with the Senate crossbench to make sure that we can provide those protections to Australia around the ISDS clauses and also with respect to labour market testing. The member for Shortland seemed particularly concerned about labour market testing and the implications for those workers. You can't just talk about a future Labor government, that you will sort it out, kick the can down the road. Why not work with us in this parliament to make this better?
In summary, if the government want my support and the support of Centre Alliance, they need to put before us the full and proper evidence and analysis because we are simply not willing to wave through the legislation on the vibe of the thing without clear country-specific analysis that clearly outlines the full costs and benefits to Australia, to every Australian. We will not be able to support this bill in the Senate.