Tuesday, 27 November 2012
Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012, Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012; Second Reading
It is my pleasure to rise to talk on the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 and the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012. I want to note at the outset that I am a very strong supporter of free trade. I think that whenever we have the chance to conclude an agreement with one of our friends or neighbours it is cause for this parliament to celebrate and endorse, because it provides not only plenty of opportunities both for our businesses and our services but also reciprocity for the services and businesses of the country with which we are pursuing the agreement. My enthusiasm for free trade is shared by all of my coalition colleagues. We are pleased about the more liberal access to each other's goods that the Australia free trade agreement will facilitate.
In terms of two-way goods and services, Malaysia is Australia's third largest trading partner in ASEAN and our 10th largest trading partner overall. The Australia-Malaysia economic relationship is a very significant one both for us and for the Malaysians as well.
According to the Department of Foreign Affairs and Trade, in 2010-12 total merchandise trade between Australia and Malaysian was worth $14.2 billion, with Australian exports of $5 billion and imports of $9.1 billion.
This agreement comes at a time when total two-way services trade in 2011-12 was $3 billion, with Australian exports of $1.6 billion and imports of $1.3 billion. The agreement builds on the ASEAN-Australia-New Zealand Free Trade Agreement and allows for significant gains for services and investment through access to increased foreign ownership in key service sectors where Australia has proven capability.
Australia's relationship with Malaysia has been long and productive. Initially, it dates back to the 19th century, when Malays participated in the pearling industry in Australia's northern waters. Australians fought alongside Malays in the 1941-42 Malayan campaign in World War II and assisted the newly independent Malaysia in the 1960s during the period of confrontation with Indonesia. Australia was also involved during the time of Malayan independence from Great Britain in 1957. Former Governor-General of Australia Sir William McKell helped draft the Malaysian constitution, and subsequently Australia also proudly sponsored Malaysia to join the United Nations.
Malaysian troops in more modern times have served alongside Australian Defence Force personnel in East Timor. Since that time, Australia and Malaysia have enjoyed an enduring and developing trading relationship, which I will speak about in some detail later on. Consultations regarding the free trade agreement with Malaysia have been underway since May 2005, when former Howard government trade minister Mark Vaile commenced negotiations with our Malaysian counterparts.
A division having been called in the House of Representatives—
Sitting suspended from 17:01 to 17:19
In future, I should probably note where I am up to when we are interrupted by a division! So if I am repeating myself, Madam Deputy Speaker D'Ath, please feel free to intervene.
I think I was just saying that as a coalition we are proud of the conclusion of this agreement with Malaysia because the negotiations for it were started under the previous, Howard government. Indeed, it was the then Minister for Trade, Mark Vaile, who commenced these negotiations, in May 2005. The agreement was concluded by this government on 22 May, when it was signed in Kuala Lumpur, with the aim that the agreement would enter into force on 1 January next year.
Australia's major merchandise exports to Malaysia include crude petroleum, copper, coal and aluminium. Australia is also one of the major providers of educational services to Malaysia. Malaysia is a major exporter of crude petroleum to Australia, as well as monitors, projectors, televisions, computers and telecommunications equipment and parts. Under this agreement, both countries will cut tariffs on a wide range of goods as well as make administration for trade simpler by addressing other barriers to trade. Australia will eliminate all tariffs on goods from Malaysia from day one. Malaysia will not go quite as far—they will eliminate tariffs on 97.6 per cent of goods imported from Australia from day one and that will rise to 99 per cent of goods imported from Australia from 2017.
Many prominent Australian industries are set to benefit from this new trade arrangement with Malaysia, including the Australian dairy industry. I know this will interest the member for Forrest. The Australian dairy industry's current exports to Malaysia are valued at $260 million per year. A liberalised licensing arrangement will allow larger volumes of milk to be exported and, for the first time, the opportunity to export high-value drinking milk in retail packs. As I said, I know the member for Forrest, with Western Australia's close proximity to Malaysia, will be interested in exploring the opportunities that are available to her constituents from this free trade agreement. In Dairy Australia's annual report for 2011-12 it was stated that as dairy products increasingly become part of the consumer's diet in Malaysia demand will only grow stronger, and Australia is well placed to meet this growing need.
The Australian automotive industry will also see an elimination of all tariffs from large cars and nearly all tariffs on automotive parts imported from Malaysia, with the elimination of all tariffs on small cars from 2016. Malaysia will immediately exempt Australian cars from its global limit on imports. The Australian wine industry will receive a guarantee of the best tariff treatment from Malaysia under the new agreement. Mr Steve Guy from Wine Australia said there were 136 individual Australian wine exporters to that market last year, which sends the message that maybe the small wine producers in Australia can find a niche in Malaysia. Given the proximity of Malaysia to Australia, and the overall preference for more expensive red wines, it makes it an attractive market for smaller producers strengthened further by this agreement.
The agricultural industry believes this agreement is a step in the right direction. Currently, Malaysia is Australia's fourth-largest sugar market and fifth-largest wheat export market. National Farmers Federation Vice President Duncan Fraser said the Malaysian market is worth about $1 billion in Australian agricultural exports and that these commodities can be boosted through the free trade agreement. Notably, there will be open access arrangements from 2023 for the rice industry, with all tariffs to be eliminated by 2026. This is a significant development for the Australian rice industry, which has traditionally struggled to get a foothold in Asian markets.
Other industries that stand to benefit include plastics, processed foods, chemicals and a wide range of manufactured products where all tariffs will be eliminated immediately. Also, tariffs on 96.4 per cent of steel and iron exports to Malaysia will be eliminated by 2016, then 99 per cent by 2017 and 100 per cent by 2020.
To complete the domestic implementation of the agreement in Australia, it requires the amendments to the Customs Act 1901 and the Customs Tariff Act 1995, the Customs Regulation Act 1926 and the enactment of a new customs regulation for the product-specific rules that are annex 2 of the agreement. On that note I now turn to the content of the two bills.
The Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 amends the Customs Act 1901 to outline the rules contained in the Malaysia-Australia Free Trade Agreement. These rules are essential for determining whether imported goods from Malaysia are eligible for preferential rates of customs duty in accordance with the agreement.
These new rules are similar to other FTA arrangements and include definitions about when goods can be considered wholly obtained or produced, when goods are produced entirely from originating materials, and when goods are produced from non-originating materials only or from non-originating materials and originating materials. It includes a definition about what counts as a consignment and when goods are either accessories, spare parts, tools, or instructional or other informational materials imported with goods.
The Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012 amends the Customs Tariff Act 1995 by providing free rates of customs duty for goods that are Malaysian originating goods in accordance with the new division 1H of part VIII of the Customs Act, by amending schedule 4 of the Customs Act to maintain customs duty rates for certain Malaysian originating goods in accordance with the applicable concessional item, and by inserting a new schedule 9 in the Customs Tariff Act to maintain excise equivalent rates of duty on certain alcohol, tobacco and petroleum products. These rates are equivalent to the rates of excise duty payable on the aforementioned goods when locally manufactured.
The bilateral trade relationship between Australia and Malaysia has reached a significant cornerstone with the signing of this FTA. The agreement will help to diversify the trading relationship by opening up access to markets on both sides. This agreement will strengthen economic links between our two countries, and consumers in both countries will reap the benefits of liberalisation as prices go up and choices go up. The coalition welcomes the opportunity to renew our bilateral relationship with Malaysia. We therefore support the passage of these bills, and we look forward to them enhancing what is an already very strong economic relationship. We are pleased to see it come to fruition in the implementation of these bills, which will see the FTA implemented from 1 January next year.
I am very pleased to rise to be speaking in support of the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 and the cognate bill. MAFTA is a very high-quality free trade agreement. It reflects the deep commitment of both Australia and Malaysia to trade liberalisation. It adds a new dimension to our bilateral relationship, and it is a tangible recognition of the strength of our existing trading relationship. It also builds on the agreement we already have with Malaysia through our FTA with the ASEAN countries and New Zealand. In the broader sense, it contributes to the future we share in our dynamic region in the Asian century.
This agreement is an early demonstration of Australia's commitment to the Asian century as we enter a new phase of deeper and broader engagement. The Minister for Trade and Competitiveness signed MAFTA on behalf of the Australian government on 22 May 2012 in Kuala Lumpur, along with his Malaysian counterpart, Mustapa Mohamed, Minister of International Trade and Industry. Negotiations started in May 2005 but were put on hold at the end of 2006 to allow both sides to focus on concluding the agreement establishing the ASEAN Australia-New Zealand free trade area. After the signing of the AANZFTA, our bilateral negotiations recommenced in 2009 and concluded in March 2012. This was following the instruction of Prime Minister Gillard and Malaysian Prime Minister Najib to work to conclude MAFTA negotiations within a year in March 2011. On entry into force, MAFTA would open new avenues for Australian goods and service exports. Like all of Australia's high-quality FTAs, MAFTA would open new opportunities for business, trade, job creation and economic ties between our countries.
Malaysia is one of Australia's most important economic partners and regional neighbours. It is Australia's third largest trading partner in ASEAN and 10th largest trading partner overall, with bilateral trade worth $16 billion in 2011. And Australia has a diverse range of trade and investment interests in Malaysia, including in agriculture, manufacturing, resources, education, telecommunications and financial services. Around 3,500 Australian companies export to Malaysia each year, and Austrade estimates there are around 250 Australian companies represented in Malaysia. Indeed, Malaysia is an export orientated economy, with a plan to achieve developed economy status by 2020. Malaysia's trade with Australia has almost doubled in the past decade, growing at an average rate of 8.2 per cent year on year, and Malaysia is one of the region's most dynamic economies.
The entry into force of the AANZFTA in 2010 was a boost to our already close bilateral trade relationship. MAFTA would strengthen further our relationship and would be an asset to both our countries as we continue to negotiate in the Trans-Pacific Partnership Agreement. Australian and Malaysian business is well placed to benefit from the vigorous economic growth in both countries. Of course, MAFTA would provide for commercially meaningful improvements to Australia's market access to Malaysia and new trade disciplines that build on Malaysia's commitments under the AANZFTA. From MAFTA's entry into force, tariff-free access would apply to 97.6 per cent of 2009 to 2011 average imports into Malaysia from Australia, increasing to 98.9 per cent in 2016 and 99 per cent in 2017.
Important outcomes for the automotive industry include the elimination of all tariffs on large cars and virtually all tariffs on auto parts on entry into force of the agreement, with tariffs on smaller cars eliminated by 2016 and removal of quantitive restrictions on motor vehicle imports from Australia.
There will be tariff-free treatment for 94.6 per cent of recent iron and steel imports into Malaysia from Australia by 2016 rising to 99.9 per cent by 2017 and 100 per cent by 2020. There will be elimination of virtually all tariffs from entry into force on plastics, chemicals, a range of processed foods and manufactured products. Australian milk exporters will have access to additional quota and access for higher-value retail products. Australian rice exporters will have open access from 2023 and complete elimination of all tariffs by 2026.
MAFTA has business-friendly rules of origin positions including a mechanism to allow goods exported from Australia to claim MAFTA tariff treatment solely on the basis of a declaration of origin by the exporter. For a wide range of service sectors, Australian entities will be able to acquire majority ownership in companies supplying services in Malaysia. This would include 70 per cent ownership in higher education services provided by privately funded institutions increasing to 100 per cent by 2015, and 70 per cent ownership in a range of other very important education services.
Investment banking, telecommunications and direct insurance providers will be able to hold 70 per cent ownership. In addition accounting, auditing, book keeping services and management consulting service providers will be allowed to have 100 per cent ownership in Malaysia. MAFTA also provides the right to majority ownership for mining related services, taxation services, tourism and travel related services, and research and development services as well.
The reality is that MAFTA will make it a lot easier for Australians to do business in Malaysia. More Australian business executives and senior managers will be permitted to work in Malaysia and they will be able to stay for longer periods. It will also benefit families by improving access to visas for spouses and dependants of Australians working in Malaysia as well. MAFTA would also provide stronger protection for our intellectual property rights and establish a framework for mutual recognition of qualification and licensing requirements for professionals and also to facilitate electronic commerce as well.
MAFTA has identified five priority areas for economic and technical cooperation. Projects in these areas would build on existing links and strengthen bilateral relations between a range of Malaysian and Australian organisations. In return, Australia would lock in faster tariff-free entry for Malaysian goods into Australia provided for under the AANZFTA, putting Malaysia on a par with Singapore. MAFTA would bring forward Australia's AANZFTA commitment to eliminate all our tariffs on entry into force now rather than in 2020 under the AANZFTA. This would accelerate tariff elimination for products such as automotive vehicles, textiles and clothing, and some manufactured goods as well. Malaysia is not a major supplier of these products within the Australian market.
We would make some limited AANZFTA-plus service commitments. Specifically, Malaysian investment in private hospital services would be covered by our obligations under MAFTA. Malaysian investors will be allowed to fully own research and development services, technical testing and analysis services, and some of the preceding works that occur at construction sites as well. Importantly, MAFTA does not include provision for investor-state dispute settlement. Overall, there would be little if any negative impact for Australian industry.
This agreement is primarily about opening the markets and that is the main force behind it. But it will also do more than that. Australia has agreed to provide a three-year package of up to 21 short- and long-term scholarships, fellowships, awards and exchanges to support Malaysia's economic reform efforts. This complements existing exchanges between Australia and Malaysia on public sector and economic governance, including through the Endeavour Awards.
The agreement will also provide for mutually beneficial economic and technical cooperation covering automotive, agricultural, tourism, clean coal technology and electronic commerce industries. An important element of this improved cooperation has already been achieved with the signing of a memorandum of understanding between Australia's autoCRC and the Malaysian automotive institute. This memorandum of understanding is a first step in the greater collaboration between the Malaysian and Australian automotive industries that the agreement should promote. It will strengthen the economic relationship and reinforce what is already a very solid bilateral relationship as well.
Upon entry into force, MAFTA will reflect Australia's very close bilateral trade and economic, political and strategic relationship with Malaysia, and will enhance Australia's engagement in the region as we work together with Malaysia on issues of mutual interest. It will be an important part of the network of free trade agreements within our region that Australia is pursuing to advance our trade interests in the Asian century. The scale and pace of Asia's transformation has profound implications for Australia and for our bilateral and multilateral relationships.
Ultimately, Australia's objective in pursuing FTAs is to increase the prosperity of all Australians. We achieve this through negotiating genuinely liberalising agreements that eliminate or substantially reduce barriers to trade for the mutual benefit of the parties. I think everyone would agree that MAFTA meets this objective very well. Trade liberalisation under MAFTA could be expected to increase two-way trade between Australia and Malaysia, and boost real GDP for both our countries. Australians should welcome this agreement. MAFTA will deepen an effective economic integration between Australia and Malaysia. It will leave Australia well positioned and, in some cases, even better positioned in the Malaysian market as one of Malaysia's closest trading partners in ASEAN. The government is keen to ensure this groundbreaking agreement can enter into force as soon as it is possible to allow Australians to benefit from the improved opportunities for two-way trade and investment between our two countries. I commend this agreement. I also commend this legislation to the parliament and the many opportunities that it provides.
I rise to speak on the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 and the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012. I support the comments of the member for Stirling, and the member for Forrest, who I understand will also be speaking on this bill. This agreement was signed in May this year, but it is worth noting that its origins go back to the previous Howard government where the process was started in May 2005. It has been a seven-year journey to get us to where we are today. Also, from personal experience, I am very glad to see this bill before the parliament and to speak on it today. Before I entered parliament, I had the opportunity to travel to Malaysia and participate in trade exhibitions in Kuala Lumpur. I was involved in several successful contracts to export goods from Australia, particularly from the electorate of Hughes, to Malaysia. In dealing with Malaysians, I have found them to be very tough negotiators but at the same time very fair. It is great to see this bill before the parliament today.
I would like to note how our exporters and how our businesses have been working a lot with Malaysia over the last decade. While the government introduced its white paper on Asia earlier this year—and we actually thought the government had only just discovered Asia—over the last decade we have seen two-way trade between Australia and Malaysia increase by more than 100 per cent. According to Austrade, at the moment there are about 3½ thousand Australian companies exporting to Malaysia each year and Austrade estimates that there are around 250 Australian companies with some form of representation in Malaysia. Our businesses have been out there, engaging with Malaysia and increasing the two-way trade. However, although we have seen an increase in our trade with Malaysia over the last decade, we currently have a large trade imbalance. At the moment, Malaysia is our 10th largest trading partner, only behind China, Japan, the US, Singapore, the UK, Republic of Korea, New Zealand, Thailand and Germany. However, last year we imported $9.9 billion worth of goods and services from Malaysia, but we are only exporting $6.1 billion worth of goods to Malaysia. We do have a fairly large trade imbalance with Malaysia at the moment. We also have an imbalance with our investments with Malaysia. While Malaysian investments in Australia last year totalled $14 billion, Australian investments in Malaysia for the last year totalled only $5.7 billion. So we have a fair way to go to catch up.
Of the particular trade between Australia and Malaysia for 2011, most of the Australian goods that we exported to Malaysia were crude petroleum, which was worth $760 million; copper, $648 million; coal, $344 million; and wheat, $303 million. They were major exports. In our services sector to Malaysia last year education related travel was a total of $759 million—quite significant amounts of money. For our imports from Malaysia, crude petroleum is currently one of our major imports at over $3 billion. We are also importing $646 million worth of monitors, projectors and televisions from Malaysia. Another $556 million worth of computers are imported from Malaysia, and a further $378 million of refined petroleum.
Going to the details of this bill, we should firstly note that even before this bill came in, much of the merchandise trade between Australia and Malaysia already takes place at either zero or very low tariffs. When the scoping study was undertaken, one of the things that was noticed about the impediments to our trade between Australia and Malaysia, was that Malaysia not only has tariffs but also has further barriers with non-tariff measures such as import licensing and quotas, which restrict our exports to Malaysia, especially in agricultural products.
This free trade agreement will see the elimination of 94.8 per cent of Malaysia's tariff lines for exports of Australian goods to Malaysia. That will increase to 98.6 per cent by 2016. In return, Australia will simply eliminate all tariffs on Malaysian goods. We will also benefit by Malaysia removing the quantitative restrictions on their car imports, and they will increase tariff quotas on a number of agricultural products. We are looking for more sales of our agricultural products, especially liquid milk and rice.
However, here in Australia, when we negotiate these free trade agreements—which everyone on the coalition side is in agreement with—we must remember that there are some impediments to our two-way trade and things that will put our nation at a competitive disadvantage. Malaysia, our 10th largest trading partner, does not have a carbon tax, so where we are putting a carbon tax on goods produced in Australia and we have a free trade agreement with Malaysia it will simply transfer the production of those goods from Australia, where that tax is paid, to Malaysia, where that tax is not paid.
In conclusion, our economic relationship with Malaysia is very strong. This bill should strengthen it and lead to further strong ties between our two countries.
International trade is the lifeblood of the Australian economy, and nobody knows this as much as a Western Australian like myself. We have an economy of around $217 billion, of which exports of goods and products make up $121 billion, or 55 per cent. With only 10 per cent of the nation's population, Western Australia generates 16 per cent of Australia's economy and 46 per cent of Australia's merchandise exports. Malaysia is a vital part of the WA trade scene. After all, we are closer geographically than the eastern states and we see Malaysia as a key market.
Many of Australia's key exports into Malaysia, including petroleum, copper, coal and wheat, come from Western Australia. These four products account for nearly half of our exports to Malaysia. With a population of over 28 million, Malaysia represents a significant opportunity for Australian produce and, I hope, particularly for Western Australian produce and those producers in my electorate in the south-west. It is an opportunity that should be developed. Currently, our merchandise exports to Malaysia are valued at $5 billion and we import product worth $9 billion from Malaysia. So the trade balance is currently weighted in favour of our partners, which really should give us significant scope to move in this new agreement.
We also remain slightly behind in services trade between the two nations, which includes bilateral trade in the education and travel markets. There is also a significant level of investment by each nation in each other. Malaysia's investment in Australia stood at nearly $14 billion in 2011 and Australia held nearly $6 billion worth of Malaysian investments. From all of this we can see the importance of Malaysia to Australia in general and Western Australia in particular.
In this process, however, it is important to take a moment to consider the wider impact of trade agreements on the Australian economy. Australia has been a long-term proponent of loosening the restrictive trade practices we see throughout the world, and we were a driving force in the Doha round of trade talks and remain active in UN trade negotiations. Naturally we do this with an acknowledgement of vested interest. We are an exporting nation, after all. Unfortunately, we have not always been able to bring the world with us in what we are trying to achieve. Many countries remain protective, particularly of their primary industries—and, from someone in the agricultural sector, it is something that has certainly been an issue for agriculture and primary production in this nation—and they do restrict attempts at trade liberalisation for primary production.
This is a significant problem for Australia given that primary production comprises such a large part of our exports. Minerals and petroleum account for nearly half of the exports, but we should note that, according to the Western Australian Department of Mines and Energy, Western Australia produces 68 per cent of the country's mineral and energy exports. We should also be aware that agricultural product exports are worth nearly $30 billion, or 10 per cent of total Australian exports. And we know that it was our agricultural exports that kept Australia out of technical recession during the period of the global financial crisis—something that was underestimated and undervalued. Therefore, fair and equitable access to food markets around the world is of paramount importance to Australian trade. It is also of critical importance to the incomes of food producers and manufacturers in this country, despite the resistance of countries that seek to protect their own agricultural producers.
It was this need that drove Australia to Doha in an attempt to continue to push market deregulation. There is, however, no greater acknowledgement of the lack of equity in trade than the failure of the world to deliver on the Doha round of world trade talks. This process has now been acknowledged as having produced nothing concrete in a decade of discussions and a lot of talk that has cost a lot of money—millions of dollars. Even World Trade Organisation Director General Pascal Lamy is on record as saying that the process of trade liberalisation and equalisation is failing. Last year he stated that the political gap between member states is 'not bridgeable'. In addition, EU trade commissioner Karel De Gucht told European lawmakers that there was no reason to be optimistic that the negotiations could be concluded successfully.
Put simply, this process is failing because the market is currently neither free nor fair in a lot of instances and too many nations have an obvious self-interest in protectionism to allow for an outcome that provides trade liberalisation across a larger number of countries. No foreign developed nation has been or is likely to be willing to sacrifice their own industries or their own farmers in the name of free trade because, in most nations, that probably would be political suicide. And no developing nation has been or is likely to be willing to slow the growth of wealth accumulation for their citizens in order to raise the standard of living in other countries—because this is what it means in practical terms to them.
So, while international trade is a free market by definition, it requires national self-sacrifice, and that is what we have seen in Australia—a lot of sacrifice. This price is too high for many nations of the world. That is why there has been a shift in world trade policy from broad encompassing trade agreements—the so-called multilateral agreements—to the current focus on bilateral agreements between individual nations, such as the one that we are considering today. This shift was probably inevitable, if we recognise and acknowledge national interest as a major influence, and this could well continue.
It is probably pertinent at this point to consider the impact on global economic trends on the likely future of international trade agreements. There is little doubt that a number of developed nations around the world are facing impending financial crisis, and this will impact on the process. Sovereign nations with massive debt levels and no short- to medium-term capacity to reach budget surplus positions stand at the edge of a fiscal abyss, and the current trend of increasing debt and printing more money—the so-called quantitative easing—will not hide forever the insolvent position some countries may well find themselves in.
Unlike Labor, the coalition does not follow the economic strategy of ignoring debt now and allowing future generations to pay it off. Delaying the pain, as we know, may be just a short-term political fix but it is long-term economic suicide and structural debt and deficit. The short-term politics, however, continue to be a paramount driving force and there are more uncertain times ahead in the world. It means that easy markets will be hard to find in the near future and countries are likely to tighten rather than loosen their trade restrictions. As I said earlier, agriculture has been and probably will continue to be a sticking point in many free trade agreements. I know that historically primary producers in this country have often felt as though they were essentially traded away in that process. This international marketplace in Australia produces, without question—and I am very proud of what we produce in this country, as one of those producers—some of the world's best-quality and most efficiently produced agricultural and food products and high-quality manufactured goods, and we will always struggle to compete on price alone in that environment.
There is an opportunity in this free trade agreement with Malaysia for many products that come out of my electorate: orange juice, wine, beef, lamb, horticulture, high-value products and a range of niche products. Many countries, as we know, provide advantages for their industries that include low-input labour costs and low levels of compliance with government regulations. These in turn provide cost advantages to their products, and we know about the additional cost of the carbon tax. I see the member for Wannon sitting here. He and I both share a great concern about the dairy industry and its capacity to compete with the increased cost of a carbon tax on every litre of milk you will cool on your farm—and there are nine billion litres of those on farms having to be cooled—let alone your other inputs. Local producers are inundated with compliance on costing issues, like the carbon tax.
In such a world marketplace, bilateral trade agreements are going to be essential. It is also going to be essential, however, to monitor and manage free trade agreements to ensure that the outcomes are delivered and that both parties receive the benefits that were planned. There remains in Australia perhaps a lack of follow-up after the signing of trade covenants. Trade agreements need to be held accountable for the outcomes that they deliver. The current proposal comes at a cost to the Australian budget of $80 million, which to some may not sound like a lot of money in the entire $370 billion annual budget, but essentially every dollar really does need to be properly accounted for. We do know about the current level of debt and deficit and we do need to make sure that every single dollar is accounted for.
This agreement, like all our trade agreements, does need to be analysed and real intangible benefits need to be demonstrated as having returned to the Australian economy. On that basis I am desperately hoping that this Malaysia free trade agreement brings real benefits not just to the broader economy but also that flow through to the grassroots level to those who are producing—particularly in the primary production areas—so that they actually achieve some tangible benefit from this particular agreement.
These two bills, the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 and the Customs Tariff Amendment (Malaysia-Australia Free Trade Agreement Implementation) Bill 2012 will allow Australia's importers to access preferential treatment under the Asia-Australia free trade agreement. The bills do this by setting out when goods can be regarded as of Malaysian origin, to take advantage of the free-trade provisions. Australian exporters and producers are able to access preferential treatment under the free trade agreement when sending goods to Malaysia. The agreement, which was signed on 22 May this year by the minister for trade and his Malaysian counterpart, Mr Mustapha Mohamed, recognises the importance of Malaysia as a market for Australia. The agreement also diversifies our trade relationship by opening Malaysia's services sector to Australian companies.
This agreement and this legislation are good for the economy, good for manufacturers, good for importers and good for exporters. Both countries have committed to the free trade agreement coming into force on 1 January 2013; passage of these bills will enable that to happen. I commend these bills to the House.
Question agreed to.
Bill read a second time.
Ordered that the bill be reported to the House without amendment.