Senate debates

Monday, 15 October 2018

Bills

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

5:46 pm

Photo of Tim StorerTim Storer (SA, Independent) Share this | Hansard source

I am a supporter of measures that increase opportunities for trade and commerce between Australia and the rest of the world. As I noted in my first speech, my vision for our ongoing prosperity centres on our lucky proximity to and relationship with Asia. This led me to a career with entrepreneurial SMEs across Asia and selling products into Asia from Australia, which personally expanded my perspective and language skills.

The opportunities for permanent benefit from greater trade with our Asian neighbours is clear. In little more than a decade Asia is estimated to have a middle class of around three billion people—a 600 per cent increase in 20 years—whereas the middle class in Europe and the US combined will be 1.2 billion, which is just 40 per cent of that Asian amount. We have already seen dramatic examples of what deepening trade with Asia can bring to our economy and society: a 63 per cent year on year increase in Australian wine export to China, the growth of international education to be our third largest export industry and Chinese tourists doubling in the last five years to be our largest visitor market.

This is not just about China. Presently our two-way trade with South-East Asia exceeds that with China and opportunities of doing much more are strong. Our proximity to Asia and the inherent strengths of 'brand Australia' and perceptions there put us in a superb position. For a country rich in land and natural resources with a relatively small population, foreign investment is essential to our development. We must support more Australian companies and institutional investors to invest in Asian countries. Asia provides new markets for entrepreneurship and innovation in Australia, and particularly in my state of South Australia, about which I am passionate. This is the lens through which I view the bills now before us.

The Trans-Pacific Partnership agreement presents an opportunity to broaden our trade opportunities with 10 other Pacific rim countries, including six in the Asian region. It does this by providing new market access opportunities for Australian exporters of goods and services, as well as investors. I welcome the foreign and domestic benefits of free trade and specifically high-quality, open, rules-based architecture.

However, with regard to this agreement, there are several issues playing into my consideration. With regard to economic benefit, from a broad perspective, there are questions about how beneficial the FTAs that we have signed really are. Analysis of the Australia-United States Free Trade Agreement suggests overall trade flows between our countries did not increase as a result of the agreement. Trade diversion was greater than trade creation. Yet, at the time, projections of the benefits coming from that agreement were in the billions.

The Singapore free trade agreement has led from a trade surplus to a trade deficit, most recently of $2 billion. The Thailand free trade agreement has moved from a trade balance to a trade deficit of $11.6 billion. The ASEAN, Malaysia, Chile, Korea and Japan free trade agreements have had mixed results—some positive. On balance, Australia's trade deficit with these countries has marginally deteriorated since the signing of these FTAs. It has done particularly poorly with regard to the Australia-US Free Trade Agreement.

That said, with regard to this multilateral agreement before us, the absence of detailed, independent modelling on the economic benefits for Australia is incredibly concerning. Instead, the government have been relying on studies that assess the TPP in its entirety. These studies are then quoted by Australian industries, noting that:

The revised "Comprehensive and Progressive Trans-Pacific Partnership" will add US$12 billion per annum to Australia's national income in 2030, or 0.46% of forecast income, an increase described by the report's authors as "relatively modest". It is also forecast to increase overall foreign investment into Australia by just US$6 billion.

Another report noted that the new modelling shows that Australian agriculture stands to make zero gains in exports under the TPP-11. The agreement was said to boost exports by $30 US billion, without saying that it would also boost imports by exactly the same amount. The Productivity Commission's outgoing chair, Peter Harris, noted with regard to the benefits of trade agreements, that:

… no one ever mentions the additional imports that arise from them, despite the benefits of cheaper imported goods for Australian consumers and business.

On wages, the report indicated that wages would, after a decade, grow by the small amount of only 0.46 per cent per year or around $10 a year by 2030.

The Australian government did not let its own Productivity Commission examine the TPP deal. For something of such significance, this seems absolutely essential to providing our agreement to the deal. There is the Victorian government's high-level analysis undertaken by Grant Thornton focusing on certain industries for Victoria. Key concerns in that are that the gains in Australia's access to export markets for goods are modest and largely limited to agricultural exports, phased in over long periods. These gains will be outweighed, to some extent, by the altered competitive situation in some markets due to other TPP-11 countries exporting the same products as Australia, which will affect the current gains we have in current free trade agreements with some of the countries in the TPP-11. The above concern about independent modelling and then the likelihood of actual overall positive outcomes from Australia's involvement in the TPP-11 agreement are extremely telling in my consideration of this legislation which is before me.

There are also significant issues around the ISDS or investor-state dispute settlement provisions which grant corporations powers to sue government for changes of policy. We should look with great scepticism upon any measures that allow companies to override the democratic rule of sovereign governments. Here in Australia we have had recent experience with the realities of ISDS in free trade agreements. In 2011, cigarette company Philip Morris used the 1993 Australia-Hong Kong Free Trade Agreement to sue the Australian government over its plain-packaging legislation. We ultimately won the case, but it cost more than $39 million in legal fees and took six years to resolve. And all of this was because the government took action to address the scourge of cigarette use in our community.

As of November 2017, there were 819 known cases in which corporations were suing governments through ISDS provisions for damages. Australia and 15 other Asian countries alone have been subject to US$31 billion in claims, and there are currently three known threats of ISDS cases against the Australian government. Of particular concern to Australia should be the large number of ISDS cases related to mining, which were 40 per cent of those launched in 2016. International law firm Ashurst emailed their clients last year after the government announced its Australian domestic gas security mechanism, alerting them to the potential opportunities of using ISDS to challenge the government's policy, stating that:

Recent changes to Australian gas export and taxation policy serve as reminders that the protections afforded to investors under investment treaties are not only relevant to investors in emerging markets. Investment treaties are also relevant to investors in modern and developed jurisdictions …

that is, Australia. The implication from the email is clear—'If you don't like what the Australian government is doing, why not consider using ISDS provisions to stop them?'

On the other hand, ISDS clauses provide protection for Australian companies investing abroad and can help to improve investor confidence. As with many things we consider here, there are trade-offs and no easy answer. They also are nothing new. We already have ISDS provisions in six existing free trade agreements. However, that is not to say that we should be proliferating them further. On balance, I see the risks associated with ISDS as outweighing the rewards. Other countries have reached the same conclusion. The US, the EU, Brazil, Egypt, Indonesia, India and New Zealand have all turned their backs on ISDS, either refusing to ratify agreements that include ISDS provisions or renegotiating arrangements to remove them.

Former Liberal Prime Minister John Howard was also not a fan. He stopped ISDS from being included in the Australia-United States Free Trade Agreement. In this parliament, we have already heard a range of eloquent arguments on the issue. I note that the ALP has put forward a second reading amendment calling on the government to remove ISDS provisions from existing trade agreements. However, this does not fundamentally address the issue of the bills before us here today—and that is what should be required.

While I will support the amendment, there should be support for other amendments that would require the government to exempt Australia from the ISDS provisions of this agreement before the enabling legislation commences. I have concerns around the provisions that waive labour market testing for contractual service suppliers. Again, there is a lack of independent analysis of the potential impacts on the Australian labour market of the removal of labour market testing for temporary migrant workers from TPP-11 countries.

The joint standing committee report on the TPP had comments that more than 435 occupations could be covered by the term 'contractual service supplier', including electricians, plumbers, carpenters and nurses; yet Minister Ciobo noted that the waiving of labour market testing does not apply to unskilled or low-skilled workers. Reports on the temporary skilled migration program of 2017-18 showed three-quarters of visas were granted to managers and professionals and 21 per cent to trade workers. While that does sound promising on one level, the impact of the TPP going forward in these areas is not clear. It could lead to unforeseen impacts on our domestic workforce that must be further investigated. Independent assessment is required. Have other countries provided Australia with such generous reciprocal visa rights? There is also concern regarding the treatment of these workers, due to them being tied to one employer and subject to deportation if they lose their job.

With these factors in mind—and weighing up the above points regarding historical and projected economic benefits, ISDS provisions, and provisions that waive market labour testing for contractual service suppliers—I have significant issues with passing this bill. I will be supporting amendments put forward by other senators that prevent this legislation from commencing until agreement is reached to exempt Australia from ISDS provisions and to reinstate labour market testing in relation to contractual service suppliers.

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