Simon Crean (Hotham, Australian Labor Party, Minister for Trade) Share this | Link to this | Hansard source

It is my pleasure to announce to the House that the government has decided to launch negotiations on a bilateral free trade agreement (FTA) with the Republic of Korea. This announcement follows the Prime Minister’s visit to Seoul in August last year, where he agreed with the President of the Republic of Korea, Lee Myung-bak, that Australia and Korea would hold preparatory talks to explore the possibility of entering FTA negotiations.

That visit and announcement, in turn, followed the release of a joint non-government FTA feasibility study in April last year that concluded that a free trade agreement between Australia and Korea that liberalised substantially all barriers to trade and investment offered significant opportunities to further strengthen our highly complementary and growing bilateral trade and investment relationship, and deliver gains to both countries through closer economic integration.

Economic modelling undertaken for the joint study established that a comprehensive FTA covering goods and services trade and investment would increase the present value of real GDP of Australia by US$22.7 billion and of Korea by US$29.6 billion over the period 2007-20.

Following the completion of two rounds of official-level preparatory talks in December last year, last week on 5 March, the Prime Minister and President Lee—while he visited this country—announced that the two countries had agreed to launch FTA negotiations. On the same day, I met my Korean counterpart, Minister Kim Jong-hoon, and we have agreed to hold the first formal round of negotiations in May.

This is a welcome development for the government, for Australian business and for the wider Australian community.

The Republic of Korea isthe world’s 14th largest economy. It is Australia’s fourth largest export market, our sixth largest overall trading partner, and a growing partner for investment in both directions. Moreover, Korea is a valued regional partner with which we are expanding our broader relationship. I note here the joint statement on enhanced global and security cooperation made by the Prime Minister and President Lee on 5 March. Korea is also our third largest source of overseas students, after China and India, and tourism links between Australia and Korea are strong. Both these areas point to the good health of our people-to-people exchanges. Closer economic integration with Korea, the only one of our top four export markets with which Australia has not yet commenced or concluded FTA negotiations, promises to deliver further gains for Australian exporters, investors, consumers and the economy as a whole.

An FTA will enable Australia to protect and enhance the position of Australian business in this market, particularly in the face of trade preferences that Korea is gradually extending to our major competitors. This sentiment was a common feature of the submissions received by the government to date. An FTA will help protect Australia’s competitive advantages in this important market. It has particular importance for Australian resources and agricultural producers, including the beef industry. It will also improve opportunities for services exporters, including the financial, educational and legal sectors, and an agreement would also enhance the position of Australian investors in the Korean market. An FTA also provides a means to strengthen institutional arrangements in each country and provide a strong base for building flexible and productive commercial relationships supportive of further trade and investment. Negotiating and concluding an FTA with Korea is an important initiative which reflects the strength of the bilateral relationship and sets our two countries on a course towards even closer relations.

I have spoken before about the importance of trade to this nation. This agreement with Korea to launch negotiations comes as we continue to push for a conclusion to the Doha Round, and the G20 meeting in London next month is an important component of that push. We have also just signed, the weekend before last, the ASEAN-Australia-New Zealand FTA. These are all important platforms upon which we continue the case for further liberalisation bilaterally with our sixth largest trading partner. Doha will be a matter of priority for G20 leaders when they gather in London early next month, and Australia is committed to ensuring that the conclusion of the round is firmly on the G20 agenda.

While there are obviously issues in the Doha negotiations on which we have yet to secure consensus, in relative terms Doha is low-hanging fruit in our response to the global economic crisis. We now need to harvest that fruit. That is why we continue to push to give substance to the Washington G20 leaders instructions that ministers should meet to finalise the Doha modalities. In practical terms, this means that we need to pick up from where we left off in these negotiations and that we do not seek to retrace past steps, so that we are able to make Doha a part of the equation in our response to the crisis.

The government’s commitment to the primacy of the multilateral trading system is well established. Australia believes the multilateral trading system developed through the WTO is vital to global prosperity. This rules-based system has provided certainty and security to trade and has helped build global economic cooperation. A successful conclusion to the Doha Round would counteract a slide towards protectionism and would help stimulate economic confidence in the current economic climate. It would also help promote sustainable economic development and reinforce confidence in, and reliance on, the multilateral trading system.

Since the 1950s world trade has grown three times as fast as world output. Each successful multilateral trade round has provided a boost to world trade growth. So we need the stimulus that trade reform would bring and that the Doha Round would deliver—if we are able to conclude it. As Director-General of the WTO, Pascal Lamy, noted whilst he was visiting this country last week: by removing over US$150 billion in tariffs, Doha would provide a significant boost to global demand and consumption.

Given the extent of the downturn, more than ever the world economy needs the confidence boost that a breakthrough on Doha would bring; and this has been, and remains, our priority. Boosting trade reform does more than stimulate economic activity; it is also the best insurance policy against protectionism. Concluding Doha will provide more insurance against protectionism through new disciplines on tariffs and subsidies.

A report released by the International Food Policy Research Institute in December showed starkly the costs of failing to conclude the Doha Round—based on what is on the table—if countries were to revert to protectionist measures. The report estimated that the opportunity cost of not concluding the round would be a drop in world trade of US$336 billion. It also assessed that a worldwide resort to protectionism could contract world trade by US$728 billion. In other words, aggregating those two figures, a failure to conclude the round could see the globe being US$1 trillion worse off.

It is also interesting that a report released over the weekend by the World Bank also dramatically demonstrated the potential impact of falling global demand on world trade. The report found that world trade is on track to register its first decline in trade volumes since 1982—the largest decline in 80 years. This emphasises the point that just as world trade is a multiple of growth when the world is growing, it also declines dramatically when the world moves into recession. So, more than ever, we need to engage with our major trading partners to do everything we can to support trade, particularly in our region.

I reported last August on the conclusion of negotiations for a region-wide ASEAN-Australia-New Zealand Free Trade Agreement. A lot has happened on the global stage since then. We understood the timeliness of acting to conclude an agreement with ASEAN and the need to use the ASEAN agreement as a platform for further liberalisation. The weekend before last, I joined with trade ministers in Thailand from the 10 countries of ASEAN and New Zealand’s trade minister to sign this historic free trade agreement. This free trade agreement was a milestone in our regional economic integration. ASEAN, as a group, is our single largest trading partner, with total trade worth more than A$80 billion. It will deliver new opportunities across the board for Australian exporters, with the potential for new high-value, ongoing jobs here in Australia.

The ASEAN trade agreement is also significant in light of our agreement to start negotiating an FTA with Korea, because both of us, Australia and Korea, have now concluded plurilateral agreements with ASEAN. Extending the principles of openness to bilateral trade arrangements will culminate in freer flows of trade and investment for our respective business communities. Pursuing high-quality, WTO-consistent FTAs is one such way we can play our part in supporting growth, jobs and livelihoods at home and abroad. This government does not take the benefits of trade for granted. Securing trade deals that improve the lot of Australian business and the Australian community takes hard work. This initiative will help strengthen Australia to sustain its economic future, which is particularly pertinent given the current global economic uncertainty.

I note that our ASEAN partners have also made important commitments to maintaining open trade flows—as evidenced by the recent affirmation of ASEAN leaders to stand firm against protectionism. The commitment of ASEAN leaders to multilateralise the Chiang Mai initiative is another welcome demonstration of a regional response to a global problem. Once implemented, it will boost confidence within the region in governments’ capacities to more effectively manage short-term shocks.

The Rudd government has emphasised the importance of reviving Australia’s regional influence as an active but independent regional ‘middle power’ helping to shape multilateralism in the Asia-Pacific region. As a like-minded partner in the region, Korea is a natural partner for Australia in pursuing many of our regional and global objectives. For Australia and Korea, two important trading nations in the Asia-Pacific region, and two founding members of the Asia-Pacific Economic Cooperation (APEC) forum, commencing FTA negotiations at this time signals to the world our shared practical commitment to trade and economic liberalisation.

A commitment to transparent and inclusive trade policies was a core part of our election platform. Our open, consultative approach to the study which preceded this announcement and the decision to enter into these negotiations honours that commitment. We have ensured that we have provided extensive opportunities for public input from all segments of the Australian community on this proposed initiative. In early December, the government called for public submissions from stakeholders on their interests or concerns regarding an FTA with Korea. More than 40 submissions have been received to date, including from companies, peak industry associations, non-government organisations, unions and individuals. Most of these submissions support the negotiation of an FTA with Korea.

The government also has commenced public consultations and will continue this in coming months, to ensure that a wide range of stakeholder views on the Australia-Korea FTA are heard. Already, the submissions received and consultations conducted have allowed us to hear from a wide range of stakeholders about their views on Australia’s possible participation. From the input received to date, the government assesses that stakeholders, on the whole, see an FTA with Korea as providing improved opportunities for trade and prosperity for Australia. This view is backed up by the Mortimer review of export policies and programs, commissioned by the government and released in September last year, which found that Australia should conclude an FTA with Korea in order to improve access to new markets.

Of course, negotiating an FTA also involves sensitivities on both sides. Managing such issues is a normal part of trade negotiations. As outlined in the document tabled with this statement, certain sectors of the economy have expressed a concern over the implications of an FTA with Korea. The government is well aware of these concerns and will continue with consultations on these sensitive areas throughout the negotiations. Taking into account this input, the government have formed the view that we should proceed to negotiations. In deciding this, one priority of the government will be to maintain and build on existing standards in our current free trade agreements, while retaining the flexibilities that we regard as important from those agreements.

I now table a document which, together with this statement, outlines the views we have heard as part of the consultation process. Taking these views into account, the government’s priorities include our desire to:

• promote trade and investment flows with Korea;
• ensure that an FTA with Korea provides a platform for comprehensive and commercially-meaningful liberalisation across goods, services and investment;
• substantially improve trade and economic integration with Korea;
• set the scene for a new phase of development in the commercial and broader bilateral relationship; and
• strengthen WTO rules and contribute to trade liberalisation in the WTO.

I note that some submitting parties have requested that their submissions not be made public. While the government can see significant opportunities from an FTA with Korea, we also are aware of the need to retain domestic policy flexibility in a range of areas. In the lead-up to the first negotiating round and also following the commencement of the substantive negotiations, we will consult further with stakeholders to assist in developing Australia’s approach to the negotiations. Of course, we continue to welcome further input into the FTA negotiating process—indeed, we encourage this input, as it assists us in properly developing our negotiating positions.

As part of the government’s commitment to transparency, we have indicated to all those who have made written submissions that, should they agree, their submission will be made public today on my department’s internet site. This is just one aspect of the government’s ongoing commitment to inclusiveness and transparency. As the negotiations get underway the government will continue to consult broadly and communicate regularly with stakeholders on development of the Australia-Korea FTA.

I ask leave of the House to move a motion to enable the Leader of the Nationals to speak for 19½ minutes.

Leave granted.

I move:

That so much of the standing and sessional orders be suspended as would prevent the Leader of the Nationals speaking for a period not exceeding 19½ minutes.

Question agreed to.

Warren Truss (Wide Bay, National Party, Leader of the Nationals) Share this | Link to this | Hansard source

I am happy to respond to the statement by the Minister for Trade and welcome the announcement that the next stage of negotiations for a free trade agreement between Australia and Korea has begun. I hope that these negotiations will lead to a high-quality and comprehensive free trade agreement between Australia and Korea. The minister was right to refer to the fact that Korea is perhaps the most significant of our trading partners with which we do not have a free trade agreement or FTA negotiations—although, of course, a lot more work needs to be undertaken in relation to our negotiations with China before there is anything resembling a satisfactory trade agreement between our No. 1 trading partner and Australia. There is a lot more work to be done, but it is important that we are talking with Korea, and the minister’s announcement today fills that gap.

There is a high degree of bipartisanship in relation to trade issues, and I think that helps to smooth the passing of the baton from one government to another when it happens—although I do note that there was no recognition made in the minister’s statement about the role of the previous government in getting these discussions to this point. In fact, most of the supporting documents that have been provided tend to suggest that history only began upon the election of the Rudd Labor government. So, in the interests of completeness, let me acknowledge that perhaps the first important step that was made in relation to the negotiation for a free trade agreement between Australia and South Korea occurred when President Roh visited Australia in 2006 and, with Prime Minister Howard, announced that we would commence a non-government joint study to look at the possibility of a free trade agreement. I made a number of announcements on that day about the details of those negotiations. A Melbourne based trade consultancy, ITS Global, was chosen to conduct the FTA feasibility study, and a year later it concluded that there would be significant gains to both countries if we were able to negotiate such an agreement.

As the Minister for Trade said, an agreement could carry enormous potential gains for Australian exporters and the wider community—perhaps an increase of as much as $23 billion in our GDP by 2020. In particular, it is important to note that Korea is our sixth largest trading partner and our third largest export market. Because of those factors, it is important that we have a mature and well-developed trade relationship underpinned by an appropriate FTA.

These negotiations became particularly urgent following the completion of negotiations for a Korea-US free trade agreement in 2007. The Centre for International Economics found in a study prepared for the National Farmers Federation that, if ratified, the US-Korea FTA could cost Australian agriculture $1.2 billion of output by 2030, with our beef industry the hardest hit. The US-Korea free trade agreement would provide the potential for favoured access to US products into Korea, and for Australia not to have some kind of equal access would inevitably have significant implications for our exports. Of course, we now know that not as much progress has been made with the US-Korea free trade agreement as might have been expected at the time that it was announced. Indeed, President Obama has made a number of very negative comments about the future of that agreement. That surprises me, I have to say, because I thought it provided a pretty good deal for the Americans and provided quite a number of leads as to what we might be looking for in an agreement between Australia and Korea. Whilst the agreement between the US and Korea is, at best, in a state of limbo in the US political processes at present, it is important that we play catch-up and that we get to a position where we might be able to negotiate and sign an agreement with Korea, hopefully in a similar time frame to that which might be achieved by the United States.

The minister has rightly spoken about the potential benefits, and I will not repeat his words. But I think it is important that we talk about the way these negotiations should be conducted. Firstly, it is absolutely important that everything be on the table at the beginning. The previous government insisted, in the negotiations with China and Japan and in other agreements, that nothing be pushed aside before the discussions began. This was a sensitive issue with Korea, and I note that there has been no particular assurance in the minister’s statement that everything will in fact be on the table at the beginning of these negotiations. Of particular interest is the question of agriculture. Agriculture is a sensitive issue, and the minister rightly attested to the fact that there are sensitivities on both sides, but it would be completely unacceptable to Australia if these negotiations were to begin with a significant sector of our exports excluded from the discussions. Whether that were done officially or just by way of a nod on the side, it would be an unacceptable beginning. There will be some difficult issues to be addressed, but an outcome that did not address some of the barriers to agricultural exports into Korea would be an unsatisfactory one.

I notice that in the documents tabled by the minister, which refer to some of the views expressed about an Australia-Korea free trade agreement, there is the statement:

Several submissions contributed by some peak industry organisations suggested that an FTA would be useful in addressing Korea’s high tariffs on beef, pig meat, dairy products, sugar, horticultural products, wine, seafood, wheat and barley.

I think that basically summarises everything that can be said on the importance of dealing with these sorts of issues in this context.

When in opposition, the minister and the Labor Party criticised the coalition for pursuing bilateral trade agreements while at the same time pursuing global reform in discussions such as the Doha Round. I am pleased to see that, now in office, they have recognised that it is possible to do both at the same time. The progress on Doha seems to get slower and slower, and I think that increases our capacity to deliver some trade advances through bilateral agreements. Therefore we have, in opposition, been supportive of initiatives to continue and conclude negotiations such as those with Chile and as part of the ASEAN-Australia-New Zealand FTA and to commence negotiations with Korea. These bilateral agreements can be advances and building blocks toward developing wider multilateral trade outcomes. I think it is fair to say that the ASEAN-Australia-New Zealand FTA probably would not have been possible had there not been such a large number of bilaterals upon which it could be built.

The minister made a number of comments about the ASEAN free trade agreement and I also will make a number of comments. I know it is always easier to be in opposition than it is to be in government when you are negotiating these agreements, but I am reminded of the Minister for Trade’s constant criticism of the free trade agreements negotiated by the previous government when he was shadow spokeman for trade. His comments were often quite vociferous. Now that he has actually signed his own trade agreements, he has opened himself up for criticism on the same score. The ASEAN-Australia-New Zealand Free Trade Agreement obviously does provide some considerable advances, but it is a long way short of the standards that the Minister for Trade, when he was in opposition, set for the previous government.

Under the agreement that has been signed by the government, by 2010 Australia will have moved 96.4 per cent of its tariff rates to zero—up from 46.7 per cent. That is way beyond what is being asked of any other country. Even New Zealand only gets to 84.7 per cent by 2010. Three countries will have moved five per cent or less to zero by 2010. There are a whole range of products that simply have been excluded from tariff concessions by a number of our partners in this agreement. Malaysia, Indonesia and the Philippines have excluded rice. Indonesia and Malaysia have excluded wine. Vietnam has excluded 41 items under the minerals section. With regard to motor vehicles—this was, of course, the big sticking point—and TCF, significant barriers remain in place. When we get to some of the other key areas, the outcome has been particularly disappointing. Access for exports of mandarines to Indonesia was one of the highest priorities identified by the horticulture sector, and that has been the case for several years. What has happened in relation to mandarines as a result of this deal? Absolutely nothing will happen until 2025 or potentially 2028, when the tariff on mandarines into Indonesia will be lowered from 25 per cent to 18.75 per cent. So nothing at all happens until 2025, maybe 2028, and then there will be only a 6¼ per cent reduction in the tariff. That is a very disappointing outcome.

I now turn to one of the minister’s favourite areas for comment when he was the shadow minister: sugar. I will quote to the minister, who is in the chamber, his comments in March 2005, when he condemned the coalition for the fact that there were no sugar concessions in the Australia-US Free Trade Agreement. ‘We can’t allow that sort of thing to happen,’ he said, four years ago. In May, when he signed the Australia-Chile Free Trade Agreement, he said: ‘Unlike the previous government, we are not selling out Australian agriculture to pursue an FTA at any cost. The last government was prepared to exclude sugar from the Australia-US FTA and to agree to long phase-ins for access improvements in beef and dairy.’ Well, that is exactly what we have in the ASEAN-Australia-New Zealand Free Trade Agreement.

Several countries have made no concessions whatsoever in relation to sugar. Others have delayed what they are proposing to do for decades—huge phase-ins or, in some cases, absolutely no phase-in at all. This is not an unimportant sugar market. We sell a third of our sugar to these areas and there will be no relaxation in the tariff barriers on sugar. I have some sympathy with the minister—I know how hard it is—but I repeat to him his own words on this occasion and say that he has failed his own test about what should have been achieved in relation to this issue.

I also comment about the rules of origin in the ASEAN-Australian-New Zealand Free Trade Agreement, which break new ground. Exporters are actually going to be able to choose which test they want to apply in relation to rules of origin—they can choose a regional value content or a change of tariff classification content. I think this is the first time that this kind of choice has been available.

That, of course, would be great for the ASEAN countries, but it would not be so good for Australia, because it will mean that goods will only have had to have passed through those countries and had a minor transformation to change their tariff, if that is the easiest test, or to pass the value test, if that is the easiest test, and the goods will be treated as though they come from that country even though the majority of the input may have come from another place. This is a significant relaxation in the arrangements, which is not likely to advantage Australian industry.

I also comment about other double standards in this agreement. All Australian tariffs on agriculture—the whole lot of them—are to be reduced to zero immediately. Immediately! This is unilateral disarmament. No other country apart from Singapore is doing that—Singapore is already doing it, but there is no agriculture there anyhow.

But, when it comes to some of the government’s pet industries like TCF and cars and the like, we have a tit-for-tat arrangement—you give up a bit; we give up a bit. In a decade’s time—and in some countries, never—there will be some reductions in tariff in those ranges of manufactured goods. So we have a double standard in relation to the treatment of agricultural products with the treatment of manufactured goods. When you come to some of the other areas where changes are being made, the papers acknowledge that this new agreement actually delivers slower progress than what was actually achieved under the Australia-Thailand Free Trade Agreement for our arrangements with Thailand. Under the old Australia-Thai agreement, we got faster tariff reductions in some areas than we do under this new agreement in our dealings with Thailand.

Whilst I believe that it is worthwhile doing agreements of this nature, I think it is important to keep them in balance. Naturally, when the government announce a new agreement, they highlight the successes and the achievements, but I point out that there are also a lot of disappointments in this agreement. In the agricultural sector, particularly, there will be alarm at how little progress has been made in some of the key areas that were so important to that sector.

I want to make a final point—and I would not have raised this had it not been for the fact that the minister for agriculture made some very provocative comments today about the import of bananas from the Philippines. I remind the minister for agriculture that, when the Philippines lodged an application to import bananas, it was naturally dealt with under the processes that were put in place, and the previous government never allowed bananas into this country. The science always said no. Now, curiously in the middle of negotiations for a new free trade agreement between ASEAN, Australia and New Zealand, the science has changed and suddenly it is okay to allow bananas in from the Philippines.

There is a whiff of odour about the way in which all of this has happened. I know there are conditions attached, but the reality is that the minister is completely wrong to suggest that somehow or other the previous government put in place mechanisms that were going to allow bananas into the country. In all our time—eight years—that the application was toing and froing between Australia and the Philippines, we never allowed bananas into this country under any conditions. This government, in the midst of new negotiations for a free trade agreement with ASEAN, has decided to allow Philippines bananas into this country. I am staggered by the decision; I find it quite incredible and I hope that they are not playing loose with Australia’s prized diseased-free status. But they do really need to explain to banana farmers, and in fact to all Australians, why what was too great a risk in the past is now suddenly acceptable. This is causing serious concern in banana growing areas of Australia.

The final area that the minister referred to was the Doha Round. Obviously there is widespread disappointment at the lack of progress that is being made with the Doha Round. The talks broke up late last year, and they are obviously in deep trouble. They broke up in disarray and with a fair degree of ill will. I am disappointed that there could not be a good outcome, but I have been disturbed about the developments in the Doha Round for quite some time, because the loss of ambition has meant that there is so little left on the table that people will be starting to wonder if this deal is even worth doing. I noticed that this question was put to Pascal Lamy—when he was in Australia during the last few days—very eloquently, I thought, by one of the delegates at the outlook conference, when he said that all that was left on the table was a ‘lamb chop’. Mr Lamy’s response to that was: ‘Oh no, there’s much more than that. What it will do is stop backsliding.’ Those were virtually the comments of the minister as well—that, if we do not have Doha Round, the tariffs and the barriers might get even worse.

We have reached the stage now where there are very few advances left in the Doha Round, but there is the need to avoid slippage. I have heard the bit about the $150 billion worth of tariffs that might go, but that is water—they are empty tariffs; they are not applied tariffs. They are not tariffs that are actually being applied at the present time. I acknowledge that there is potential in some cases for those tariffs to be applied in the future, but they are not here at the present time. Unfortunately, there is little left on the table in relation to the Doha Round and that is very, very disappointing indeed.

There is a rise in protectionism—led in particular by the Europeans, with their dairy, and also by the US—and that is disturbing. We all need to fight against the rise of protectionism, even in difficult times. In fact, world recovery will slow, not speed up, if there is more protectionism. We need to remind certain Australian industries of that fact as well. We should not do trade deals that are bad deals just for the sake of getting our name on a piece of paper if they will not actually deliver better outcomes for Australia and our trading partners. I welcome the Australia-Korea free trade agreement discussions. I hope they will remain ambitious and comprehensive, and that they will deliver an outcome that will benefit Australian industry and Australian consumers as rapidly as possible.