Senate debates

Tuesday, 18 March 2014


Korea-Australia Free Trade Agreement; Order for the Production of Documents

5:14 pm

Photo of Nigel ScullionNigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | | Hansard source

I table documents relating to the order for the production of documents concerning the Korea-Australia Free Trade Agreement.

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

by leave—I move:

That the Senate take note of the document.

I thank Senator Scullion and the government for providing the new Korean free trade deal modelling. The process we went through is that we requested the Korean free trade modelling three weeks ago, but we received modelling that we could clearly see had been prepared a couple of days before it was given to us. We were most interested to see what work had been done to back up statements that had been made by the government over the last three months in relation to the Korean free trade deal. We seem to have no debate in this country around free trade deals. We know that the government has put significant weighting on pushing through as many free trade deals—or so-called free trade deals—as possible in its term of government over the next three to four years. In fact, you could say that the government has hung its hat on free trade deals.

This concerns me, and it concerns the Greens party. I know it also concerns many in the community and in the Labor Party. Although an open economy definitely brings benefits—and no-one is disputing the benefits that trade does bring to our economy—our economy has already been opened significantly, especially over the last two decades, and one wonders what we have left to trade with other countries. Looking at the way trade deals and trade negotiations are evolving, a number of new areas of public importance and matters of public concern have come to our attention in what we suspect has been underlying our recent free trade negotiations such as the Trans-Pacific Partnership Agreement.

One of these issues is an old issue but a very important one, and that is the inclusion of what are called ISDSs, or investor-state dispute settlement clauses. We call them Trojan Horse clauses. They give corporations the ability to sue sovereign governments should decisions and legislation impact the future profits of those corporations under certain conditions. These ISDS agreements have been in place for some time, but they are proliferating.

Given the changing nature of trade deals relating to a whole range of matters of public interest and public concern, we would like to see more information around the modelling on trade deals and, for example, what impacts have been looked at by the government in these trade deals. We are looking at the basic modelling. We know that modelling in simple econometric models—input-output models—looks at changes to tariff arrangements and consequential impacts on national income. They are very basic models. They have been around for a long time. They do not include trade in services, only trade in goods, and they certainly do not include many of the complexities that we know are evident in modern trade deals.

We have had 24 hours to look at the new KAFTA modelling. It was limited. Clearly it did not cost much. It was not put out to tender. It did not meet the threshold that Senator Wong determined during estimates. Not only did it not attempt to model any of the complexities and the risks inherent in modern trade arrangements, but it could not—it was not capable of doing that. So my point is a simple one: if you are going to go out spruiking the economic benefits of trade deals, you need to have a basis for spruiking those potential benefits. There has been no recognition of the costs associated with these deals.

Of particular interest under the Korean free trade agreement that has recently been negotiated and signed by cabinet but is yet to be ratified by parliament was the information coming out of the car industry, especially late last year, and statements made by Toyota, Ford and Mitsubishi that changes to tariff arrangements were killing their industry. We also had experts from the car industry saying that if the Korean free trade deal were negotiated it would officially kill the car industry in this country. In isolation, changes to tariffs might not be enough to collapse an entire industry. But, given the difficulties that industry was facing from a number of other areas such as a high Australian dollar, this has been one of the major contributors to the collapse in the car industry in this country and the loss of 20,000 to 30,000 jobs.

Have these things been factored into our trade agreements? That is the simple question we are asking here, and we want an honest answer. If we are going to have a debate in this country around trade, let's have an honest debate. While we acknowledge that there are definitely benefits to trade—there always have been—we would like to see those benefits scrutinised against the potential costs and the potential risks. Hence our asking for this modelling, and we will spend some more time reviewing it. Did the government know, and did it have negotiations with the car industry, especially around free trade? Over the last four years, did the previous government have negotiations around the impact on the car industry of these trade negotiations?

It has never been acknowledged. The risks of this trade deal have never been acknowledged. In fact, the modelling we received shows that the Korean deal, for example, is going to be beneficial to the car industry because of manufacturing of automotive parts. Considering that we have had an entire collapse in the industry and the industry is shutting down from 2017—with a corresponding loss of those jobs—this modelling seems a bit light on. There is no evidence in what I have been given to show that those risks were incorporated and that there was any factor put into these models relating to the collapse of the car industry and the loss of these jobs.

One of the reasons that we are raising these concerns now is that we are seeing a proliferation of free trade deals. We are talking about new bilateral trade deals with, for example, China at the moment and Japan. We are seeing multilateral deals being negotiated, such as the Trans-Pacific Partnership Agreement. Another one is RCEP, which potentially involves another 10 countries. In fact, we have so many complex layers of trade deals on top of trade deals on top of trade deals. The logic behind trade deals is pretty simple: you open up your market; you remove barriers; you provide opportunities for exporters or for importers. It helps maximise competition and benefits to the economy. But it is always assumed in trade theory that there are winners and losers. It is assumed in theory—and I say 'theory' with a lot of emphasis on that word—that the losers are compensated by the winners. But you show me any compensation from trade deals that has come from those countries that have benefited.

An example that is very obvious is what Ford and Mitsubishi were saying about the Thai free trade deal, where 170,000 Thai cars were brought into Australia last year and only 160 Australian SUVs were exported into Thailand in return. We got some agricultural benefits; there is no doubt about that. We had some primary industries selling more produce and commodities into Thailand. But where was it assessed that we would have this impact in this country? What risks were acknowledged or modelled in these deals?

We have to be very careful to get it right. We have to have a mature conversation in Australia around these trade deals, which now include investor-state dispute settlement clauses—which even John Howard would not include in the US free trade deal. The former Labor government refused to include ISDS provisions. The German government just this weekend said they will not be negotiating a European free trade deal with America if ISDS provisions are included. We have even seen some far Right think tanks in America say that the US government should also not sign these deals because they are a barrier to democracy.

In a strange way they also cast a negative light on the current legal systems that we have in this country. In fact DFAT said on their website back in 2004 that there was no need to include these provisions in our trade deal with the US because we already had well-established legal systems and they were not necessary. The Productivity Commission has modelled them and said they add nothing to trade deals. We have seen similar evidence provided by overseas economic institutions. They do not necessarily increase the level of trade or investment flows between countries, but what they clearly do is provide a risk to the sovereignty of the nation in terms of making legislation for the public good and for the interests of the communities. If those interests defer to special interests, we have problems. We do not need to go down this road.

The Korean free trade deal will be the first deal that this country has signed with ISDS provisions in the last 12 years, so it is significant that we look at this now. I am hoping that this will get looked at very closely by the foreign affairs and defence committee very shortly and that we can have some good robust debate around whether we need these Trojan Horse provisions in modern trade deals. I am looking forward to having that debate with other members of the chamber.

Question agreed to.