Monday, 12 November 2018
A Fair Go for Australians in Trade Bill 2018 [No. 2]; Second Reading
I agree with the last statement Senator Carr made: I hope this chamber does give this particular piece of legislation the treatment it deserves. I think my vision of that treatment would be slightly different from Senator Carr's. I think it is actually very sad—I've risen in this place on a number of times to talk about this; and it wasn't in the context of those directly opposite, it was in the context of other members of this chamber talking about it—that as a chamber, as a parliament and as a society we are at risk of going down the populist rabbit hole of an antitrade agenda. We've seen it in other countries. I do find it slightly ironic that Senator Carr—and the Greens for that matter—is on the same page as President Trump when it comes to ISDS, which, as I understand it, President Trump has recently negotiated out of the North American Free Trade Agreement.
We've seen across the political spectrum an abandonment of a long-held consensus that trade is good for societies that embark on it. It is good for many reasons. It is good because it boosts the wealth of all societies. This is not a zero-sum game; you do not have winners and losers. If you trade, everyone has the potential to get wealthier. That is not a pollyannaish view of economics. There are people who can suffer in the structural adjustment—and it is part of the role of government to smooth out some of those bumps. But this cannot be done by returning to policies of the past that we all know have failed.
Senator Carr quoted some economist that he described as 'right wing'. I will paraphrase Keynes. Keynes knew that, following World War II, the Treaty of Versailles, and the reparation conditions it put on Germany, was a massive risk to the world. It was a massive risk because it put a cost on the German economy that was going to lead to resentment, economic underperformance and Germany being isolated from the rest of Western Europe. He knew that, in time, that would lead the world down a very negative path. He was right about that. It led, I think in the view of most historians, directly to the Second World War and the rise of Nazism in Germany.
Economic integration of our communities—economic integration at the level of governments, at the level of business-to-business contacts and at the level of individuals being able to travel and work overseas—is good for all societies. It brings societies closer together. It generates the wealth that societies like ours can use to fund things like the NDIS. Senator Carr said we should be modelling these exercises. But who could have said 50 years ago what our economic ties to Singapore, an underdeveloped Asian economy at that point in time, would have been 50 years later? It was completely unknown, and unknowable. Trade is not something that is governed from above. Trade depends on business-to-business links. It depends on innovation. It depends on the ability of people to talk across borders, to make arrangements and to come to economic conclusions that are of betterment to all parties.
Again, I'll go back to the word 'consensus'. There used to be a consensus on trade, which does seem to be breaking down in our current world. I use the word 'consensus' very advisedly. I hark back to the Hawke and Keating governments, which I think you would expect I'm no great fan of. But, at the level of their ministries, they understood the importance of trade, not just to Australia but as a path to linking economies more closely together, linking individual businesses more closely together, bringing prosperity and bringing peace. I think a genuine outcome of trade is that the world is a more peaceful, more integrated place. We understand each other better if we trade. The Trojan Horses that are being put forward at the moment—the ISDS clauses, labour market testing—and the fig leaves that Labor is using to walk away from the previously bipartisan commitment to the benefits of trade to both Australia and the world are just that—they are fig leaves. They are Trojan Horses. They are commands from the union movement. They are not anything that, in reality, the people of Australia in particular but also the people of the other countries we trade with need be concerned about.
I'll use an example. I was at the JSCOT hearing into the Peru free trade agreement last Thursday where we directly saw the Labor members of that committee walking away from a commitment to free and open trading policies. Again, it greatly saddened me that we saw that. We heard that in fact the ISDS clause in the Peru free trade agreement was one of the strongest ISDS clauses we had ever seen in protecting things like Australia's public health system, the Pharmaceutical Benefits Scheme and the right to legislate on things such as tobacco. We heard it was one of the strongest. We also heard—and this doesn't need to be heard, because everyone knows it is a fact—that ISDS clauses have been used against Australia only once, unsuccessfully, in 30 years of existence. This is the big threat to Australian sovereignty: something that has been used once in 30 years in a tribunal case that was lost.
These ISDS clauses are wanted by our trading partners. Peru wants the ISDS clause in the Peru-Australia Free Trade Agreement because they see it as a pathway to giving businesses who want to invest in Peru confidence that the government is not going to step in and appropriate their property. It gives large organisations the confidence of investing in an economically underdeveloped and also, potentially—and I'm not making any comments on Peru—politically underdeveloped country. There are many countries around the world that don't have the strong institutions and the strong institutional history of good institutional governance that places like Australia, Western Europe and North America have.
There are many places around the world that are desperate for companies to come and invest and grow their economy to give their people the opportunity that those in the West have had for generations, and ISDS clauses are a way for those countries to give confidence to the investment community. They know it's important that people can come and invest without fear that the government is going to step in and take over that property at a future point in time or make some change in the law that makes that property valueless. These are not radical clauses. As I said, they've been around for 30 years. They give protection to Australia's sovereignty, but at the same time they give certainty to exporters. In fact, Australian exporters have used ISDS clauses in their dealings overseas to protect their own economic position in other countries, which, as I said, perhaps don't have the strength of commitment to the rule of law that Australia does and the strong institutions and the desire not to do negative things towards the people who wish to invest and grow our economy.
I think it's really important when we are considering these types of bills that we do not fall into the trap of believing the rhetoric that in some way these are removing Australian sovereignty, are weakening our ability to govern ourselves and have our own law. In actual fact these agreements increase the level of engagement of Australian businesses with overseas countries. As I said, this is an unalloyed good. It is good for Australia. It gives us new opportunities to grow the wealth of our companies. It also gives other countries—because this is a two-way street—the opportunity to sell their goods and services in Australia. This obviously is of benefit to the Australian people, who get access to new, potentially cheaper and different services and products that they haven't had access to before.
It is sad that Labor is walking away from a legacy of support for agreements and the benefits that trade does deliver. It's sad to see that, particularly in the case of the Peru free trade agreement, which is good for Australia and particularly good for Australian manufacturing ironically. I find it a little odd that Senator Carr is not aware of the fact that the Peru free trade agreement offers some real benefits to Australian manufacturing. Labor is walking away from that support, seemingly at the insistence of the union movement.
Labor is undermining the process that enables Australian producers to export to the world more of what we produce here. It is undermining the means by which farmers, miners, manufacturers and hundreds of smaller businesses can grow their supply chains, can create more jobs in Australia and can export more. It is undermining the process that supports thousands of Australians to stay and work in and to grow rural and regional communities across the country.
What does this bill propose to do? It is going to open up each and every free trade agreement potentially for renegotiation. This potentially would have a massive cost in terms of uncertainty to the business community and a massive cost in terms of the sheer amount of work involved, particularly for the Department of Foreign Affairs and Trade. I notice Minister Payne is here today. I know Minister Payne knows the sheer amount of work that goes into negotiating these trade agreements and the level of uncertainty that would flow if we opened up every one of our trade agreements to renegotiation.
Labor have said that they're going to establish a new team of negotiators within the Department of Foreign Affairs and Trade and charge them with renegotiating agreements previously finalised. That means that a Labor government would ask the very team that negotiated the original agreements to go back, undo all their hard work and open up every aspect that has been negotiated. These are always done by negotiation—there is give and take. We can't order or require foreign countries to behave in a certain way. It is a two-way street, and we need to negotiate with them. They will go back and undermine all the hard work that has previously been done.
How much would that cost? How much would that cost Australian businesses? How much would that cost in terms of uncertainty if you do not know if a current tariff rate reduction is going to flow through in a particular time frame? It would certainly undermine business to an extraordinary degree and it would cost the Australian economy an extraordinary amount. Not only does this threaten the established free trade agreements that this government in particular has been so successful in negotiating but it also creates enormous uncertainty for the businesses which are already trading based on those agreements.
What does Labor expect our trading partners to do: to cop it? to not expect anything in return? to not see it as a fundamental abrogation of the negotiation in good faith that has already occurred? Would a Labor government capitulate if our trading partners wanted to do this to us? It's a question that needs to be answered. It's a very troubling approach—it's a very naive approach—from the opposition, and I certainly hope it never comes to fruition.
Let's look at what some of the industry stakeholders have said. GrainGrowers, the national grain farmer representative organisation, said:
Bilateral and regional preferential trade agreements such as the TPP-11 are critical in improving export opportunities and prices for the Australian grain sector.
Red Meat Advisory Council chairman Don Mackay said, on the TPP-11:
It is a significant and exciting agreement for Australia’s 82,500 red meat businesses and the 438,000 Australian jobs our industry supports, many of whom are completely export reliant.
Fiona Simson, NFF President, said that the CEPA 'locks in important new trade opportunities for our meat, grain, sugar, dairy and horticultural producers'.
This is a government that is committed to trade, and that's not an accident—and 27 years of continuous economic growth is not an accident. Trade is fundamental to that growth. Trade is critical to the Australian economy. We have always been a trading nation. We are at the end of the trading line, as it were. If we don't trade, we are not in a geographically advantageous position from the rest of the world's point of view. We are at the end of the line. In Western Australia in particular, my home state—the grain industry, for example—90-plus per cent of Western Australia's grain is exported. The vast majority of our agricultural produce as a whole is exported. Obviously large amounts of minerals are exported. Trade is the lifeblood of Western Australia. It is what grows our economy. It's what creates the jobs of today and jobs into the future.
I note in passing—and hopefully I'll have time to go to this again later—some of the benefits from the Peru free trade agreement, which is currently being considered and where some of the jobs that are being created potentially lie. One of the big winners out of the Peru free trade agreement is machinery sales; 95 per cent of tariffs, which are currently up to 17 per cent, will be eliminated on entry into force of the Peru free trade agreement. This represents agricultural machinery, which is manufactured in Australia. It also represents mining equipment, which is manufactured in Australia. I note in passing that recent ABS statistics showed that, for the first time in a long time, manufacturing jobs in Australia are on the uptick; they're actually increasing. We've seen a long structural decline in manufacturing jobs in Australia under all governments—this is undisputed—but recently we've actually been turning a corner. That's because what Australia does very well is high-tech manufacturing in areas like agriculture and mining as well as some aspects of high-tech shipbuilding and other military asset production, and we have opportunities to supply, into markets like Peru, the mining and agricultural machinery that we produce in Australia. Others that would benefit include paper and paperboard manufacturers: 86 per cent of tariffs, which are currently up to nine per cent, eliminated on entry into force of the Peru free trade agreement. This would cover 95 per cent of Australia's current exports of these products.
We also see increased access for beef, which is obviously pretty significant for the Australian agricultural sector, and wine—again, the Peru free trade agreement would see elimination of tariffs of up to nine per cent across products upon entry into force, with some others being phased out over a five-year period, which is quicker than the TPP-11. In retail medicine, tariffs would be eliminated on entry into force. In plastics, tariffs on many products would be eliminated either immediately or within five years. This was negotiated at 11 years under the TPP.
One of the things that came up at the hearing last week was: why have a TPP and a Peru free trade agreement? Well, the simple answer is that the Peru free trade agreement, because it's a bilateral agreement, doesn't have to cover all the competing interests of 11 countries. It's an agreement between Peru and Australia, so it can be a lot narrower in focus and it gives a lot more preferential access to a large number of products. Trade is a good thing and I think those opposite should remember that.