Senate debates

Wednesday, 29 October 2014

Statements by Senators

Trade with China

1:27 pm

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

I rise today to speak on the China free trade agreement. Labor strongly supports trade liberalisation because it is good for economic growth, exports, jobs, living standards and competitiveness. We support high-quality trade agreements that are in Australia's national interests. That is why we are concerned that the Abbott government is at risk of signing up to a substandard free trade agreement with China.

The reality is that the Prime Minister, Mr Abbott, has made a tactical blunder in his approach to trade negotiations with Beijing. By setting a deadline of securing a deal this year, the Prime Minister has put Australia's negotiators under pressure to accept a deal—any deal—at any cost. Even his own agriculture minister, Mr Joyce, has publicly distanced himself from this negotiating tactic. A genuinely liberalising agreement with China has the potential to deliver significant benefits to Australia. By contrast, a poor-quality deal struck to meet a self-imposed deadline would lock in second-best outcomes for Australian businesses for years to come in one of our most important markets.

The fact is that Australian business is concerned that the Abbott government will cut a substandard deal. A recent survey by the Australian Industry Group found that a majority of its member companies said they believed the FTA with China would have a negative impact on their businesses. Ai Group's Innes Willox told ABC Radio National's breakfast program on Monday of this week—that is, 27 October—that there is concern that more is going to be given away than gained to get the FTA. Mr Willox also said that the government was being secretive about the negotiations, that business was not being kept in the loop and that there needs to be more consultation. We agree.

It has been reported that Mr Abbott hopes to sign an FTA with President Xi Jinping at the time of the G20 summit next month. If an agreement is announced it will be important to look through the spin and the media releases and assess the substance of the deal. Labor believes a high-quality free trade agreement with China should meet the following benchmarks. On agriculture, any deal must be 'New Zealand-plus'. It should ensure that Australian farmers are on a competitive footing with their Kiwi counterparts under New Zealand's FTA with China. This will require China agreeing to eliminate or significantly reduce its tariffs on a wide range of Australian farm goods.

Organisations representing red meat producers, including the Cattle Council and the Australian Meat Industry Council, have called for the China FTA to eliminate all tariffs on Australian livestock, red meat and co-products. They point out that, under the China-New Zealand FTA, Chinese tariffs on New Zealand beef and sheepmeat will be completely eliminated by 2016. Australia must at least match, and preferably improve on, that outcome otherwise our meat producers will be locked into a competitive disadvantage with their New Zealand counterparts in the Chinese market. The same logic goes for Australian farm goods like dairy products, grains, sugar and cotton.

On industrial goods, any FTA must eliminate or significantly reduce Chinese tariffs on Australian manufactured products. This must include the immediate removal of the punitive new tariffs China recently announced on coal. For services there must be commitments to remove discrimination and to open the Chinese market to Australian services ranging from banking and insurance to environmental and mining services. But the FTA will need to go further by tackling the significant impact of non-tariff barriers in China in relation to Australian exporters. This will require greater transparency in Chinese domestic regulations and the non-discriminatory application of Chinese regulations to Australian businesses as compared with their Chinese competitors. An FTA with China will also need to ensure Australian businesses do not face unfair competition from subsidised Chinese goods, so it must not weaken Australia's dumping, countervailing duties and safeguards arrangements.

On investment, the agreement should encourage greater flows of capital between China and Australia. As I have said previously, we believe that the agreement should increase the threshold for Foreign Investment Review Board screening of Chinese investments in Australia in non-sensitive sectors to just over $1 billion in line with the threshold for investment that is applicable to investment from the United States, New Zealand and, as agreed, with Korea and Japan.

Labor believes the Abbott government should resist pressure from the National Party to impose lower thresholds for Chinese investment in agriculture. In return, China should ease its restrictions on Australian investments into China, especially in the minerals sector which discriminate against Australian businesses by making it more difficult for them to develop high-quality resources. There should be no investor-state dispute settlement provisions in any FTA with China. These provisions in trade agreements give foreign companies and investors greater legal rights in Australia than local companies. They are a concern not only for the Labor Party but for many in the community. I would make the point that even the Chief Justice of the High Court of Australia has expressed concern about the impact of these provisions.

Provisions on movement of people must strike the right balance between fostering employment opportunities for Australians while ensuring businesses can secure the skills they need. That means Australia should retain the ability to require employers to show there are skill shortages if they wish to fill job vacancies using temporary migration provisions under a Chinese FTA. In free trade agreements negotiated by Labor, Australia reserved the right to require labour market testing for appropriate occupations and skill levels. Labour market testing simply means that the employer needs to show that they cannot find local employees to fill a position. That can be demonstrated, for example, by simply advertising the job locally, or through providing other evidence that there are no local workers available with the skills needed. Labour market testing is an important safeguard for the integrity of Australia's temporary migration system.

Labor have already raised concerns about the Korean free trade agreement's provisions on movement of people. The government agreed to remove Australia's right to require labour market testing where Korean nationals are to be employed in Australia using temporary migration arrangements like section 457 visas. The China FTA should either retain labour market testing for appropriate occupations and skills, or it should include acceptable alternative safeguards for the integrity of our temporary migration system. This is important in order to ensure that the benefits of economic growth and expansion in trade flow through to Australian job seekers. It is sound policy and it will also contribute to community acceptance of a trade agreement which is in Australia's long-term interests. It is the approach China and New Zealand took in their free trade agreement. Under that agreement New Zealand retains safeguards on temporary migration. These include labour market testing for some trade, technical and professional occupations, and numerical quotas for a range of other occupations.

I also draw the Senate's attention to comments by the Prime Minister, Mr Abbott, on 14 October 2014 at a media conference in which he announced the government's new industry policies, including temporary migration arrangements. He was asked by a journalist, 'There are changes in here about the 457 visa program. I just wanted to check, will you be making any changes on labour market testing?' The Prime Minister replied, 'On the 457s, labour market testing will remain, but we want it to be easier to engage in.' The Prime Minister has, therefore, very clearly committed to retain labour market testing requirements for temporary migration. Labor will hold the Prime Minister to that commitment in the context of the China free trade agreement. If the China FTA dispenses with labour market testing it will amount to yet another broken promise from Mr Abbott.

Let me summarise the tests for a high-quality free trade agreement with China: New Zealand-plus market access outcomes for Australian farmers and other exporters; elimination or significant reductions in tariffs on Australian industrial goods; retention of Australia's anti-dumping safeguards; major improvements in market access for Australian services; reducing red-tape and other barriers to Chinese investment in Australia and to Australian investment in China; no provisions which give Chinese companies operating in Australia superior legal rights to those enjoyed by Australian companies; and retention of labour market testing or comparable safeguards on temporary migration. If Mr Abbott's China free trade agreement falls short of these benchmarks, it will be another case of the Prime Minister talking big only to bring home a second-rate deal.