Senate debates

Monday, 25 November 2019

Bills

Customs Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019, Customs Tariff Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019; Second Reading

12:19 pm

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Hansard source

I rise to speak on the two bills which implement the Indonesia-Australia Comprehensive Economic Partnership Agreement: the Customs Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019 and the Customs Tariff Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019. The agreements implemented in these bills touch on important aspects of the different roles I occupy in this place—firstly, as a senator for the Labor Party, the party representing working people; and, secondly, as shadow foreign minister, with an abiding interest in Australia's place in the world. First, I want to offer a simple proposition as a member of the Labor Party, the party of working people. The proposition is this: trade benefits working people. Trade benefits working people by contributing to economic growth. Trade benefits working people by improving productivity. It benefits working people by creating better pay and more rewarding and more secure jobs. And it benefits working people by delivering lower prices and greater choice for consumers.

It's important to note that Labor has deep roots in reformist trade policy. As Prime Minister in 1948, Ben Chifley took Australia into the new multilateral trading system negotiated as part of the Bretton Woods post-war international economic architecture. Chifley's vision for post-war economic reconstruction was to develop the manufacturing industry in new export markets, initially in America and over the long-term in Asia. He knew the value of trade from his life before entering parliament, when he worked as an engine driver. The trains he steered between Bathurst and Sydney carried goods from western New South Wales destined for export markets. On the return journeys, they brought back imported goods—everything from pianos and sewing machines to Irish whiskey and corned beef. Just as hundreds of thousands of train drivers and truck drivers today move exports and imports around Australia, Chifley's tradition lives on.

The next Labor government, led by Gough Whitlam, cut tariffs by 25 per cent in 1973. Gough said the short-term aim of the tariff cut was to reduce inflation, whilst its longer term aim was to improve efficiency. Certainly a more efficient economy was the primary motivation for the 1988 and 1991 tariff cuts by the Hawke and Keating governments. But Hawke and Keating also recognised that tariffs were pushing up the price of clothing, whitegoods, cars and other basic consumer items. They recognised there was nothing progressive about a policy which meant working people struggled to afford decent school shoes for their children. It has been estimated that the Hawke and Keating tariff cuts have put nearly $4,000 a year into the pocket of the average Australian household.

Trade liberalisation was one of the economic reforms contributing to Australia enjoying more than a quarter of a century of uninterrupted economic growth, continued also by the Rudd and Gillard governments. More recent economic analysis has estimated that, over the period of 1986 to 2016—which spans governments of both political persuasions but certainly includes the Hawke and Keating governments and the Rudd and Gillard governments—Australia's policies of trade liberalisation boosted Australian GDP by 5.4 per cent and increased the average income of family households by nearly $8,448 a year. So this was a benefit to our economy but also to households.

Today, exports and imports account for about 40 per cent of Australia's GDP. According to the Centre for International Economics, one in five Australian jobs depend on trade. That's 2½ million Australian workers. The highest percentage of export related jobs are in mining. Seventy-five per cent of mining jobs are export related. Forty-three per cent of agricultural jobs, 38 per cent of metal product manufacturing jobs, 28 per cent of jobs in food manufacturing and 31 per cent of jobs in transport and storage jobs are all related to export trade. These are the people my party represents—mine workers, including the copper-mining and refining workers in South Australia, not to mention the people working in our wine industry, which has been a national export success story. Wine exports to China have grown substantially since the China-Australia Free Trade Agreement came into effect. There are also farm labourers, meat workers, manufacturing workers, truck drivers, wharfies, airline industry workers, shop assistants, storemen and packers. In addition, there are thousands of jobs in hospitality and transport that rely on tourism and, of course, higher education and vocational education rely on the rapid growth in the export of education services.

A study by economists at the Department of Industry, Innovation and Science has found that Australian businesses that export will hire, on average, 23 per cent more staff, pay 11 per cent higher wages and have labour productivity that is 13 per cent higher than nonexporters. Austrade research shows that, on average, exporters provide more secure jobs, are more likely to provide employees with training, are more likely to negotiate wages through enterprise bargaining and are more committed to safety in the workplace. What all of these studies indicate is that exporting doesn't only mean more jobs; it also means better jobs for working people. Australia can never rely solely upon our domestic economy to generate the growth we need to create jobs. Trade agreements open up world markets for Australian businesses, allowing them to find new sources of demand for the goods and services that Australian workers produce.

I know that there are some in our movement who believe that trade protectionism, such as tariffs on imports, supports local jobs. Jobs are Labor's priority. But, let's remember, tariffs raise prices. So there would be a cost to this approach, to workers, consumers, and to the broader economy. Tariffs lead to uncompetitive industries, an inefficient economy and, ultimately, jobs that are not sustainable—and Australians will not thank us for such outcomes. Equally, they will not thank us for sitting on the sidelines while other countries negotiate trade agreements to their advantage. Refusing to engage in trade agreements allows our competitors to gain market share at Australia's expense, reducing export growth for our businesses and potentially leading to job losses for our workers, and certainly to the creation of fewer jobs.

But the reasons for supporting these bills are not just for the domestic benefits they bring to Australians; there are also strategic reasons for supporting trade that are of particular concern to me as shadow foreign minister at this time. Our region is the locus of strategic competition, including around who makes the rules that govern relations between nations. The nature of the region and its arrangements, including on trade, are fundamental to Australia's future prosperity and Australia's future security. Labor wants a region which retains a system of institutions, rules and norms to guide behaviour to enable collective action and to resolve disputes. We want a multipolar region in which those seeking to make or shape the rules do so through negotiation, not imposition; we want a region with an open trading system and investment transparency to maximise opportunity; and, obviously and ultimately, we want a region where outcomes are not determined only by power.

There is a strong nexus between international trade, economic growth, development and poverty reduction. We are also by now well aware of the benefits of development and poverty reduction when it comes to countering violent extremism. Protectionism and mercantilism foster tit-for-tat retaliation and hostility, which can put the wider system of international cooperation under pressure. History has shown us this. History has shown us that mercantilist approaches to trade have contributed to international tensions and rivalries. The protectionism of the 1930s exacerbated the Great Depression and contributed to the tensions that ultimately led to World War II. It is no coincidence that, in the aftermath of that dreadful conflict, countries sought to establish a multilateral rules based trading system.

In terms of Australia's own strategic interests, there are few countries more important than Indonesia. This economic partnership agreement between Australia and Indonesia will help it to address a relationship that is underdone. Indonesia has a population of some 260 million people and is one of our closest neighbours, but it accounts for only two per cent of our exports. In 2018, two-way trade in goods and services was worth $17.6 billion, making Indonesia only our 14th-biggest trading partner. Moreover, Indonesia is an emerging economic giant in our region and in the world. The Indonesian economy has expanded strongly over recent decades. It is the third-fastest growing economy in the G20, behind India and China. By 2030, Indonesia will move from the 16th-largest economy in the world to the ninth largest, and to the fourth largest, on current predictions, by 2050. It will have a consumer class of 135 million people by 2030. Indonesia's urban population could reach 63 per cent in 2030, up from 51 per cent in 2012. As Indonesia's economic clout grows and more of its people enter the consumer class, business opportunities in Indonesia will continue to grow. But, of course, we should not overlook its challenges. To realise its potential, Indonesia will need to continue the structural reform with the economy undertaken by President Widodo. It will have to improve its business and investment climate, cut red tape, and continue to tackle corruption.

Under IA-CEPA, Australia will eliminate all of its remaining tariffs on Indonesian goods imported and, in return, Indonesia will provide duty-free or prejudice residential access to 99.9 per cent of goods from Australia. It's an agreement which locks in fresh trade opportunities for Australian steel manufacturers as well as for our meat-growing, sugar, dairy and horticultural procedures. The Australian steel industry and steelmakers will benefit as Indonesia reduces its existing tariff of 15 per cent on Australian steel to zero. It will also guarantee import permits for 250,000 tonnes of Australian steel per year—good news for Australian manufacturing, especially for companies like BlueScope and for its workers in Port Kembla.

Australian farmers will be able to export 500,000 tonnes of grain, wheat, barley and sorghum a year into Indonesia tariff free, with the quota increasing five per cent a year. Indonesia is already our largest wheat export market, but higher grain prices in Australia caused by the drought have hit our exports. The industry has said it wants to be in a position to rapidly recover market share in Indonesia when conditions in Australia improve, and it has said that the economic partnership agreement will be critical in this regard.

The five per cent tariff on Australian live cattle will be eliminated and a quota established for 575,000 head of cattle, growing four per cent annually over five years to 700,000. Northern Australia—Queensland, the NT and Western Australia—will be a great beneficiary of this.

Indonesia will progressively eliminate tariffs on a wide range of other products, including frozen beef, sheepmeat, dairy, honey, citrus fruit, vegetables, copper, plastics, automotive parts and machinery products. Australian vocational education and training providers will able to establish ventures in Indonesia with up to 67 per cent Australian ownership; and, under the agreement, Australian businesses will also be able to invest up to 67 per cent in international companies. So you can see how the strategic and economic benefits align in support of this agreement with Indonesia.

There are other components of this legislation, relating to our free trade agreements with Hong Kong and Peru. Hong Kong is our fifth-largest source of inward investment and an important entry point into China and the North Asian market as well. It is also an important recognition in support of 'one country, two systems' that we have an agreement with Hong Kong alongside our free trade agreement with China. Meanwhile, Peru is a growing market for Australian goods and service exports, with a GDP comparable to that of Vietnam. It has been one of the fastest growing economies in the world over the past decade. The Peru agreement will help Australian businesses deepen engagement with the dynamic markets of Latin America.

Whilst I support these agreements, I'm conscious that, along with the great benefits of increasing global economic integration, there are risks. Such integration can also unleash rapid, unpredictable and unsettling change. We must ensure Australians benefit from globalisation rather than being left behind. We must be committed to giving people the tools they need to participate in the global economy—tools like a quality education, mastery of workplace skills, an understanding of technology, and an ability to adapt to change and learn new skills. As the world becomes increasingly internationalised, these attributes are critical to people's ability to succeed in the workplace and to cope with economic change.

Trade agreements should not undermine domestic regulations that deliver legitimate public policy goals. Unlike the coalition, Labor understands that trade policy must be complemented by investment in education, skills, infrastructure, innovation and research, because trade, notwithstanding the broad benefits, can place uneven pressures on our society. So, because I do support more open trade, I also believe we must have proper social democratic institutions and complementary progressive policies. That means insisting on high-quality trade agreements that maximise local employment; it means trade agreements that do not undermine public policy in health care, the environment or labour rights; and it means trade agreements supported by policies which have at their heart the expansion of opportunity—investments in education, innovation and infrastructure—to ensure people prosper in the globalised economy.

My colleague the shadow minister for trade, Madeleine King, won significant concessions from the government on Labor's behalf to ensure that the implementation of these agreements will safeguard Australian jobs and address the exploitation of foreign workers. These concessions would not have been won if not for Labor, and I commend Ms King for that work.

I also recognise and acknowledge there has been concern about investor-state dispute settlement provisions. I would note that the provisions in the agreement with Indonesia do have safeguards for public policy in areas like health, environment and government services. In fact, these provisions represent a step forward, because the new safeguards in these agreements increase Australia's sovereignty by replacing the regressive ISDS which was in place under the existing bilateral investment treaty with Indonesia. At Labor's insistence, the government has further committed to review older-style investment treaties to replace them with modern safeguards and to review the ISDS mechanisms in this agreement five years after it enters into force.

In another win for Labor, this is also the first FTA finalised by the coalition where they have conceded to Labor demands not to waive labour market testing for contractual service supplies. The labour mobility provisions in the IA-CEPA relate only to business visitors, intracorporate transfers of executives, and independent executives. These are amongst the narrowest movement-of-natural-persons provisions in any FTA under the coalition and are in line with provisions to which Labor has previously agreed in office. With these commitments, Labor believes it is in the national interest to support this legislation, for the reasons I've outlined.

In conclusion, Australia's economic welfare, Australia's strategic opportunity, our national security and our cultural dynamism will all depend on how deeply and how well we integrate with fast-growing economies like Indonesia's, not only in traditional goods trade but also in investment, tourism, services supply chains and people-to-people links. So we need to continue the Labor mission of trade liberalisation to ensure Australia can take advantage of the changes that will unfold in years to come. Australia cannot afford to withdraw. Australia cannot afford to mimic the 'America first' approach, which, paradoxically, risks America's leadership in the world. We are a trading nation, and our wellbeing depends on the quality and depth of our engagement with the world. We are a substantial power, but we are not a superpower. We can't throw our weight around. The Prime Minister may seek to mimic 'America first' with his tactic of criticising what he calls 'negative globalism', but, ultimately, Australia's interests in trade and in climate change, for example, are in constructive international cooperation. Labor does not pursue reform on trade and trade liberalisation out of blind adherence to abstract theories. We pursue trade liberalisation because it has demonstrated that it delivers concrete benefits for the people we represent. Trade raises our living standards. So I support trade not despite being a progressive but because I am a progressive.

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