Monday, 25 November 2019
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
I'm pleased to have the opportunity to speak on the bills that are in front of the Senate today—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 Indonesia-Australia Comprehensive Economic Partnership Agreement and the Australia-Hong Kong Free Trade Agreement are already in force. The bills before the parliament simply put into effect the consequential amendments to customs and tariff arrangements that flow from the executive entering into the treaties.
I want to use this opportunity to speak on the bills to make a few comments more broadly about the bilateral treaty process, the commitments given by the government in order to secure Labor's support for the Indonesia agreement in particular, and the future of the debate within Australia about these agreements and future agreements that the Commonwealth enters into. I want to begin by stating the obvious—that a trading nation like Australia needs to have a more detailed, constructive and preferably bipartisan conversation about trade than has occurred in the past. The debate should genuinely include civil society, unions, industry organisations and human rights and environment groups. It's a debate that shouldn't be the preserve of big business and the current DFAT orthodoxy that any agreement is better than no agreement—the orthodoxy that Australia's interest lies only in increasing GDP regardless of whether the exports are in up-the-value-chain industries and regardless of the impact on jobs, particularly in regional Australia.
A better debate first requires reaching a consensus about the elemental purpose of trade policy and economic statecraft around trade in economic, geopolitical and social terms. National objectives around trade should be set around establishing export markets that support good jobs in the country, particularly, as I said, in regional Australia. That means establishing a clear-sighted and tough-minded approach to privileging market access for Australian goods that are up the value chain, having a much tougher approach to ensuring temporary guest workers work only in areas of short-term genuine skills shortage and are not exploited and that there is an honest and independent accounting of the geopolitical as well as economic interest that drives regional agreement-making and bilateral agreement-making.
In the context of the geopolitical shifts underway globally, particularly in our region, trade is a vital tool. But the debate in this country must rise above the superficial. That means that proponents of agreement should be explicit about the strategic and geopolitical value of trade agreements rather than hide behind bald and often indefensible assertions of the unchallengeable economic benefit of these agreements. Recent experience has been that trade policy has been not much more than an ideological megaphone for any trade agreement that happens to come along—a shouting-down of opposing voices rather than a tough-minded approach that puts the national interest and the interest of Australian workers and firms at the heart of the national approach to trade. Too much of the debate is unaccountable, with perfunctory scrutiny and without acknowledgment of the real costs of jobs in favour of wild assertions about the benefits to consumers.
Trade agreements, particularly bilateral trade agreements, can or should deliver economic benefits that are in the national interest. But those benefits can be spread unevenly, and, in a developed, high-wage country like Australia, they can cost jobs. Of course, Australia has gone much further, in shedding blue-collar jobs, than our trade agreements have pushed us in to. I note in particular the deliberate offshoring, by the Abbott government, of the Australian automotive industry—40,000 jobs in suburban and regional Australia.
The period of trade liberalisation is associated not just with an unequivocal economic benefit but also with a loss of Australian industrial, engineering and manufacturing capability, skills and employment. In 1993, 13.6 per cent of the Australian workforce was employed in Australian manufacturing, and manufacturing accounted for 12.9 per cent of GDP. In 2018-19, seven per cent of the workforce is in manufacturing, and manufacturing is 5.6 per cent of GDP. In 1993, just over a million people were employed in manufacturing, which has fallen to 871,000 today. The first two decades of the decline in these jobs and the hollowing-out of regional and suburban blue-collar work occurred against a backdrop of tariff reduction and globalisation attributable to Australia's aggressive approach to trade liberalisation, with no countervailing effort by government in terms of industry policy to make sure that good Australian manufacturers and good Australian industry had the capacity to export and create good jobs.
The precipitous decline in Australia's export complexity since the GFC and the consequent collapse in the manufacturing share of national product should be a source of real concern for every Australian. Since the global financial crisis, Australia has dropped 24 places in Harvard University's Export Complexity Index rankings. That's one of the reasons for wage stagnation and it's one of the reasons for the collapse in good jobs in the Australian economy.
Export complexity—that is, the mix of products and services that countries export—has been found to be a good predictor of income distribution and a good predictor of equality in the economy. The more complex a country's products—not just their diversity but the expertise and technological infrastructure required to produce them—the greater equality it enjoys relative to similar-size economies in similar-size countries. Achieving a higher level of export complexity is critical to generating good jobs across the community on a scale that minimises inequality. Australia's current preponderance of commodities is 79 per cent as a percentage of our total exports, but the production of commodities doesn't employ people at a level proportionate to its footprint as a percentage of GDP. These industries taken together employ less than five per cent of Australian workers. They are base load for national income. But Australia in the 21st century, in hopefully a multipolar, growing Asian regional economy, will need economic diversity to push its exports up the global value chain.
To the extent that the efficacy of trade agreements is measurable, proponents usually assert an association with rising gross national income. However, GDP aggregates conceal more than they reveal. In Australia, exports compose just under 22 per cent of GDP, and, as I said, 79 per cent of that is commodities. There are some sectors that contribute significantly to export related national income that are high value and labour intensive—for example, higher education—but too many of Australia's exports are too low down the value chain to sustain future prosperity and equality.
The Harvard Atlas of Economic Complexity found that Australia ranks as the 93rd most complex economy in the Economic Complexity Index ranking. Compared to a decade prior, Australia's economy has become less complex, worsening 22 positions in the ranking. It found that Australia's worsening export complexity has been driven by a lack of diversification of exports. That should provoke a sense of shock and urgency amongst Australian policymakers and it should be of deep concern to Australians in government who care about jobs—good jobs—and future national self-reliance.
Export related firms are where good jobs are located, and a continued shift of Australia's exports down the value chain to fewer skills-intensive commodities spells mortal danger for the long-term sustainability and growth of the Australian economy. It is not possible to deliver growth or deal with inequality in an environment of declining export value, which is one of the key factors underlying wage stagnation in the economy. Failure to act condemns Australia to a future of intensifying precarious work, lower wages and shrinking government revenues, with consequences for public sector employment and social dislocation.
Trade agreements, of course, aren't the only factor in determining whether or not Australia can shift its exports up the value chain. Government action in industry policy, skills and vocational education and institutional cooperation in the labour market are all critical here, but trade policy and agreements do matter if they prioritise access to markets for higher value exports rather than a complacent focus on commodities. It's that effect of trade agreements that's partially responsible for the discontent in adversely affected communities that manifests itself in the rise of populists, right-wing populists and other political undesirables in Australia and in nations overseas. It's a discontent that, unless addressed in the way that we approach these matters, will lead to more dislocation and more social disadvantage. That's a matter of fact.
A World Bank commissioned analysis of the TPP showed that the TPP would cost 38,000 full-time jobs in Australia while adding something like half a per cent to GDP over the course of a decade. One of the major shortcomings with our approach to trade at present is that we have no way of assessing on an independent basis the likely outcomes of agreements that we settle. We don't commission independent analysis of an agreement in prospect, and we can't, therefore, assess whether its outcomes match our expectations in the short, medium or long term. I'm glad that the Joint Standing Committee on Treaties, of which I'm a member, has again with these agreements—as we did on a number of occasions in the 45th Parliament—recommended that the government institute the practice of commissioning such independent economic analysis.
It's also a matter of fact that contemporary trade and investment agreements involve matters that are well beyond the scope of core trade related matters such as tariff reduction and increased access quotas. They include arrangements in relation to the power of multinational companies to challenge government policy through questionable international tribunals. As we saw with the Philip Morris action, these challenges are costly, time-consuming and reform-delaying and have a potential chilling effect on government action in the public interest. They include, in Australia's case, arrangements that shape our approach to temporary foreign labour. In the past, these have been lopsided concessions on Australia's part. We've allowed access to temporary workplace visas without any matching benefit for Australia and without adequate safeguards against worker exploitation. What is more serious about this is that we've done it in an environment of abandoning the principles of labour market testing and actual skills testing in key trades like electrical and plumbing. These matters are of concern to the Australian public. There's a strong argument in relation to these issues that they are not in the national interest. At the very least, we need to have that conversation and we need to be able to have that argument.
In relation to the Hong Kong agreement, it essentially formalises the existing arrangements and does terminate, critically, the old bilateral treaty that Philip Morris used when they sued the Australian government. In relation to the Indonesia agreement, there are non-trade aspects that deserve scrutiny. While we recognise the benefits that may come with the agreement, there are legitimate concerns about both the substance of the trade deals and the process by which, more broadly, they have been settled.
In the main, I think it is fair to say that most Australians wouldn't know a lot about ISDS arrangements but, when they come to know more about them, they are more concerned. If, in the Prime Minister's weird formulation of it, you were concerned about negative globalism, whatever that is, and protecting Australia's sovereignty and our capacity to make laws in the national interest, you would have a big concern about ISDS arrangements. The government has added to the unholy mess of ISDS mechanisms, the 'noodle bowl' of arrangements, by putting new arrangements in place with countries like Japan for the first time and making additional or replacement arrangements with numerous countries. Many are inconsistent with one another. Some explicitly protect tobacco control, and some explicitly protect measures like the PBS. Others don't. Some mention health and the environment. Others don't. Why? How can we claim we’re putting in place the best ISDS mechanisms when every mechanism we sign up to is different from the last?
In chapter 12 of the Indonesian agreement, there is a provision for future agreements on labour market access. We know that the government, which is making a big noise about reducing permanent migration, is at the same time looking to expand temporary migration in order to meet its own budget forecasts. It is critical to note that the expansion of temporary work visas is not just a function of the trade agreements that the country has reached. They are a result of deliberate government action, well beyond what is required in trade agreements. The consequences are stagnant real wages, falling standards of living, record underemployment, stalled productivity, stagnant economic growth and further damage to our skills and innovation systems. The government, now in its seventh year asleep at the wheel, has deliberately created this situation and is continuing to make it worse.
In order to secure Labor's support for the Indonesia agreement, Senator Birmingham wrote to the Labor shadow minister for trade and made a number of commitments, including to seek the termination of the existing bilateral investment treaty with Indonesia; to do a review of older style ISDS provisions, to replace them with modern safeguards; to do an assessment of the operation of the investor-state dispute settlement mechanism in a review of the Indonesia agreement, which is mandated five years after its entry into force; to not use the provisions of the Indonesia agreement to extend any labour market testing waivers for Indonesian contract service providers; to ensure working holiday-makers are not exploited, by implementing the government's response to the recommendations of the Migrant Workers Taskforce, including new criminal penalties; to ensure that working holiday-makers are qualified for work undertaken in Australia, including for electrical and plumbing work; and to confirm that the agreements neither create an obligation to privatise any government services nor restrict any future decision to acquire public assets.
During supplementary estimates, I asked the minister about the process and timing for the government to implement the commitments he gave to the shadow minister. In relation to the termination of the 1993 investment agreement between Indonesia and Australia, the minister said that, having reflected on the JSCOT report and the commitment he gave to seek termination of that agreement, it would have been preferable to seek termination of the bilateral treaty as part of the overall negotiations for the agreement being enabled by these bills. However, I welcome the statement from the minister in estimates that he has authorised the department to commence exploratory discussions with Indonesia toward the goal of terminating the 1993 bilateral treaty. The department in turn indicated that they have reached out to Indonesia and proposed a text, which will be finalised in due course, given that Indonesia is also of a mind that the 1993 bilateral investment treaty should be terminated.
In relation to article 12.9, which the minister described as a 'soft commitment' that the government may enter negotiations on waiving labour market testing following a review at some future point, the minister indicated that a first threshold test is whether we agree to even have a review after three years; and then, if we have that review, what it finds and how it's run. Then there is a further threshold of whether we agree to do anything out of the review. Most importantly, in response to questions, the minister told the hearing that the government had made it clear that it would not entertain, propose or bring forward anything that involves labour market testing waivers and, were the review provision to be exercised and any changes recommended, would bring those forward to JSCOT for consideration.
In relation to the exploitation of temporary foreign workers, the minister indicated that he has had discussions with Ministers Porter and Coleman about implementation of the recommendations of the Migrant Workers Taskforce. It has been indicated in answers to questions taken on notice that the opposition will be provided with a timetable for the implementation of those provisions. In relation to trades licensing and safeguards, the minister confirmed that somebody who is going to work as an electrician in any state or territory of Australia needs to be able to prove and demonstrate their skills and meet local licensing provisions, regardless of what visa or residency status they have.
I will always support, and Labor will always support, fair and free trade, especially where it can be advanced cooperatively on an even, bilateral or multinational basis, and on the basis that it is actually in the national interest, in the interest of Australian firms and in the interest of Australian workers.