Senate debates

Tuesday, 4 March 2014


Korea-Australia Free Trade Agreement

5:20 pm

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

I seek leave to make a statement in relation to the government's tabling of the modelling outlining the economic costs and benefits of the Korean free trade deal.

Leave granted.

I start by thanking Senator Cormann, the Minister for Finance, for providing the information that we sought relating to the modelling of the Korean free trade deal. Free trade deals are one of the biggest items on this government's agenda. The Greens have been very vocal about our desire to see a more mature and balanced debate relating to free trade in Australia. I am pleased to have received the information on the modelling. In discussions with DFAT at estimates last week, they acknowledged that the modelling that has been completed was not put out to tender because it was below the $80,000 threshold and that the modelling itself was limited. The modelling factors in trade in goods between the two countries but not trade in services. Essentially, it looks at changes to tariff structures and impacts on different industries. The modelling itself is not capable of looking at the inherent complexities involved in trade deals, especially in relation to areas such as ISDS, investor-state dispute settlements, and what impacts they have on, for example, future trade flows and investment flows between nations. It is, as I expected, a fairly limited modelling arrangement. Why I am talking about it is not because I am grandstanding here. It is an economic model. I have taught quantitative methods and I understand the limitations.

The issue I have is that the government is out spruiking this free trade deal. Just on Q&A last night, a Liberal MP was talking about a $5 billion-a-year boost to the Australian economy and multiple jobs. I think this is the risk that we run with this free trade agreement. That is why I wanted to see the modelling. Because if we are out there talking about free trade, we should also be acknowledging that trade—let us put aside the word 'free' for a second—has risks. This was clearly reflected by the Productivity Commission in what was probably the most comprehensive report that has been done, certainly in recent decades, in relation to trade in this country. For example, they highlighted that these investor-state dispute clauses do not add anything to trade. What they could lead to is inflexibility for us as parliamentarians in relation to our sovereignty and our ability to legislate in the public interest.

The Productivity Commission also very clearly stated that the potential benefits—and I underline the word 'potential'—of the free trade agreements currently under negotiation have been oversold and their negatives largely ignored. What I am asking and what the Greens are asking for—and I am sure Senator Madigan and others in this chamber also—is a more mature debate about trade. We need to recognise the risks.

One of the specific things that I was interested in getting access to in this modelling was what scenario analysis, if any, or what simulations had been done in relation to the car industry. We know from the collapse of various automotive manufacturers in this country that they have all fingered free trade deals as being a culprit for their decisions to close down. That was especially the case with Toyota. They very clearly made a statement where they cited the impacts of current and future free trade deals for their decision to close here.

We have got on record last year, even in October and November, automotive industry experts saying that if the Korean free trade deal goes ahead it will finish the car industry in this country. Taken in isolation, a change to their tariff structure may not be enough to close their industry. But it makes sense that an industry that is under pressure, especially because of a high Australian dollar and its cost base, does not need extra pressures. They very clearly outlined that this free trade deal, if it were to proceed, would shut down the industry. It was certainly highlighted on that day as playing a major part in their decision to close.

I was interested to see whether this type of risk and this type of cost had been factored into our free trade deal, because I think it is only fair that if you are going to talk about the benefits of free trade—and I have no doubt there are benefits to trade between nations; we have been trading for over 10,000 years as people and it is a natural thing for us to do—you also have to talk about the costs. What concerns me about this document in front of me is that, clearly, it was ex-post the collapse of Toyota. So it has only been written in the last week or two. Certainly, the date on the report is 28 February, which is the date after we asked comprehensive questions at estimates on these types of risks.

I will try to seek Labor's support and other support to find out what other modelling was done prior to this new report that I have in my hand, because the government were talking about these benefits in the second half of last year when they came into government. The Korean free trade deal itself was one of the first things they went on the front foot about in terms of their trade agenda, saying what great outcomes this would have for the economy. I would be very interested to see what types of modelling they did to make those claims and to know why I now have in my hands what certainly seems to be—and I am happy to stand corrected—an economic modelling exercise that was done the day after estimates or was certainly changed after estimates, because it incorporated the collapse of one particular industry.

I believe—and I said it last week in estimates—that these types of risks to the automotive industry should have been factored into free trade deals, as should any industry that is negatively impacted. If you have a look at this document, you will see there is a table of industries that are negatively impacted. That is good. Although we are only dealing with trading goods here; we are not dealing with the trade in services and we are not dealing with a whole complex arrangement that is now in place for trade deals. Trade deals now are not what they used to be. Currently, they are mostly about investment and protecting investment. By that, I mean direct foreign investment; long-term investment; 20- or 30-year investments; protecting companies; and IP. There are a whole range of things now that there never used to be.

In dealing with investment flows between countries, suddenly we have a whole new array of factors that we need to consider in trade deals. That is what the Productivity Commission warned of. Certainly, I do not see any recognition of costs here. It is very clear that the modelling is talking about nett benefits.

Another reason I am so keen to shed more light on these trade deals is that we are now talking about sending a massive delegation to China and Japan. We are also negotiating what I suspect is possibly the biggest trade deal ever: the Trans-Pacific Partnership Agreement. It is between 12 nations. It is a multilateral trade deal and it contains a whole new set of complexities. We absolutely have to get a mature debate going in the Senate if we want to see it in the country and if we want to see in the media.

We should not be going out, spruiking the benefits of free trade deals without acknowledging their costs, certainly in the case of giving corporations the same sovereign powers as nations. The ISDS is quite simple. It gives the corporation the ability to sue a government if they change a policy that impacts on their future profits. That is it. They set up an international arbitration, parallel with governments, that allows corporations to sue governments for changing legislation.

They are talking about carve-outs, some sort of legal jargon in clauses that will certainly lower the risk of that happening. But it is happening all around the world, because trade deals are evolving into areas where they are now. For example, look at not only IP but also internet access. There are all sorts of things that we all use in daily life. It is time that we took a much closer look at the powers that we want to give corporations.

This is not about stifling investment; in the US free trade deal John Howard decided that we did not need these clauses in our free trade deals, yet now we are incorporating them. There is a very clear assumption that we had good legal systems back then and they were not necessary. So why are we taking these risks now? Someone has made this decision on our behalf. I have no idea whether it was Minister Robb or someone at DFAT, but we need to get to the bottom of this. That is why I am going to the effort of standing here today talking about trade for 10 minutes. It is not the most exciting of subjects, but it is absolutely essential to do this because it is very important for this country's economy, community and environment.

Question agreed to.


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