Nola Marino (Forrest, Liberal Party) Share this | Hansard source

I rise to speak on the Customs Amendment (Australia-Chile Free Trade Agreement Implementation) Bill 2008 and the Customs Tariff Amendment (Australia-Chile Free Trade Agreement Implementation) Bill 2008. The explanatory memorandum notes that Australia’s trading relationship with Chile is $856 million in Australian dollars, ranked as Australia’s 41st largest merchandise trading partner and our 28th largest services trading partner in 2007. Basically underpinned by a solid investment relationship, Australian companies have significant investments estimated at about $US3 billion in 2007, the fourth largest source of foreign investment in Chile. With a major presence in the mining sector, Australia’s top goods exports to Chile in 2007 were coal, civil engineering equipment, specialised machinery and transport vehicles. Australia’s main imports from Chile were copper, pulp, wastepaper, non-ferrous base metal waste and pig iron.

Australian business sees significant potential in the Latin American market and considers Chile, with its relatively stable and transparent commercial environment, to be the practical stepping stone into other markets in Latin America. In addition to Australia’s exporters of coal and possibly LNG in the future, Australia’s mining services companies see increasing opportunities in Chile’s buoyant mining industry. There is also increasing interest in Chile’s agriculture, entertainment and education sectors as well as in professional services, particularly engineering.

The coalition began negotiations with Chile in a formal sense in 2006 with a view to developing a comprehensive agreement. This process has now concluded with a comprehensive free trade agreement. It was the intention of the coalition government that the Australia-Chile Free Trade Agreement remove most barriers to Australia’s exports of goods and provide economic integration for markets. The Australia-Chile Free Trade Agreement is expected to enter into force on 1 January 2009. In order for the agreement to take effect, both the Customs Act 1901 and the Customs Tariff Act 1995 need to be amended. The Customs Amendment (Australia-Chile Free Trade Agreement Implementation) Bill 2008 contains the necessary amendments to the Customs Act 1901. These amendments provide the rules for determining whether goods originate in Chile and establish powers to allow Customs to obtain manufacturing records from Australian producers and exporters. The amendments in this bill will give effect to Australia’s obligations under chapter 4 of the Australia-Chile Free Trade Agreement. Chapter 4 outlines the rules for determining whether goods originate in Chile or Australia. The rules are integral for determining whether imported products from Chile are eligible for preferential customs duty rates under the agreement.

The Customs Tariff Amendment (Australia-Chile Free Trade Agreement Implementation) Bill 2008 contains amendments to the Customs Tariff Act 1995 to implement part of the agreement by providing duty-free access for certain products and preferential rates of customs duty for other goods that originate from Chile; phasing the preferential rates of customs duty for certain products to 0 by 2015; and creating a new schedule 7 to the tariff to accommodate those phasing rates of duty. The bill aims to complement the amendments contained in the Customs Amendment (Australia-Chile Free Trade Agreement Implementation) Bill 2008.

After Brazil, Chile is Australia’s second largest merchandise export market in South America, with approximately 120 Australian companies actively trading with Chile. In commercial terms, Chile’s importance to Australia derives from our significant investment links. Over 50 Australian companies have registered offices with over $2 billion in direct investment in Chile, including activities by AGL, AMP, BHP, Hoyts and Orica. Major Australian exports to Chile in 2007 were coal, civil engineering equipment, specialised machinery and transport vehicles. The major imports from Chile in 2007 were copper, pulp and waste paper, non-ferrous base metal waste and pig iron.

The coalition supports the agreement, with some of the benefits to include the elimination of Chile’s tariffs on 91.9 per cent of lines covering 96.9 per cent of trade; a harmonised and simplified system of customs procedures; a commitment by Chile to maintain an open and non-discriminatory market for Australian service suppliers, including in education, professional services, mining and telecommunication services; non-discriminatory access to Chile’s government procurement market; the right of Australian investors to protect their investments through investor-state dispute settling procedures; and temporary access rights for business visitors to Chile.

This will be Australia’s fifth free trade pact and our first with a Latin American country. Australia has implemented four free trade agreements, initiated by the coalition: the Australia-United States Free Trade Agreement, the Thailand-Australia Free Trade Agreement, the Singapore-Australia Free Trade Agreement, and the Australia-New Zealand Closer Economic Relations Trade Agreement. The coalition government recognised that two-way trade between Australia and Chile is growing quickly—up from $574 million in 2006 to $856 million in 2007. Australia is the fourth-largest foreign investor in Chile, with around $3 billion of direct investment. The coalition understood that a free trade agreement with Chile would offer Australian exporters opportunities across the board which will be particularly valuable in services and investment areas, including: mining and energy; technology and services; engineering and consulting services; franchising; education and training; information technology; and tourism and infrastructure. Other areas that will benefit include: energy, including coal, LNG and renewables; agriculture, including dairy, meat, ovine and bovine genetics production and technologies; and food and beverages, including wine. Our Australian agricultural sector contributes significantly to our economy as one of the largest exporters of beef, mutton and lamb and as one of the world’s largest producers of wool. The dairy industry is a major exporter and one of our biggest agriculture producers.

While I support the free trade agreement, I understand the potential effects of the agreement on the horticulture industry. There have been some concerns that should be noted regarding the horticulture industry. Horticulture Australia’s submission to the Joint Standing Committee on Treaties pointed out that because Chile and Australia are both in the Southern Hemisphere, they share common seasons. This means that Chilean horticultural products can be imported to Australia at the same time as Australian horticultural products are on the market. The submission notes that Chile and Australia are global competitors in horticultural products and Chile is a major producer and global trader of table grapes, apples, avocados, kiwifruit, stone fruit, pears, berries and cherries. It also noted that Chile’s global horticultural exports in 2007 were valued at US$3.2 billion while Australia’s were valued at US$800 million.

Horticulture trade is defined in the submission as covering nursery, vegetables excepting legumes, fruit and nuts and further processed horticultural produce. Industries that could be affected are table grapes, apples, pears, summerfruit, cherries, strawberries, blueberries, avocados, prunes, dried grapes, citrus fruits and other fruits. Many of these are grown in my electorate, and I am very concerned about the effects on my producers, particularly on the new avocado venture by Advance Packing and Marketing Services, owned and run by growers in Manjimup and Pemberton. The new venture, which was badly impacted by the scrapping of the Regional Partnerships program, has in spite of this allowed nothing to stand in its way after years of planning and development. The growers have funded and built a $2 million packing shed totally dedicated to packing avocados for the 30 growers in the region.

The south-west now produces the majority of avocados in Western Australia, 20 years since the first commercial plantings commenced in the region. The crop this year will more than double to a million trays of avocados. Horticulture Australia’s submission stated that the avocado industry has a base of 1,100 growers, with a GVP of A$120 million, and considered that a significant share of the domestic market, potentially 25 per cent or more, could be lost to the Chileans. It was noted that Chilean avocados have a much lower cost of production than Australian avocados, and at certain times of year there are large spikes in production, which means growers have trouble moving into the US and Europe and could find a market in Australia.

Apples and pears are also grown in my electorate, mostly around the town of Donnybrook. Horticulture Australia’s submission noted that, because there is a base of 1,400 growers and a GVP of approximately $450 million, there would be a significant negative impact on price returns to Australian growers and it could result in the loss of up to 40 per cent of the domestic market. Chile, it said, is a substantial global producer, heavily geared to export markets, with the key advantages of cheap labour and water.

Horticulture Australia anticipates that the price of the Chilean products will be less than that of the Australian products because of the cheaper labour costs in Chile, and stated that labour comprises approximately 70 per cent of the total domestic cost of production in Australia. The submission also states that Australia’s imports of horticultural produce from Chile were valued at A$17 million in 2007, while Australia’s horticultural exports to Chile were minimal, at just A$300,000.

Australian Pork Ltd also expressed concerns about phytosanitary issues, stating in its submission that, in terms of food safety, the agreement should not negotiate on specific SPS measures or on trade-offs between market access and the application or lowering of SPS measures and standards. It also stated that DFAT should:

… recognise Australia’s unique health status as superior over those Chile has confirmed equivalence with its meat inspection systems with the US and Canada.

A submission to the Joint Standing Committee on Treaties from the Queensland government noted:

… the Queensland Government would not like to see any changes to Australia’s scientifically-based Import Risk Assessment processes as a means to provide additional access for fruit from Chile.

Clearly the Joint Standing Committee on Treaties acknowledged the concerns of the horticulture industry and other submissions. Their report 95, tabled on 16 October 2008, recommended that the Department of Foreign Affairs and Trade undertake and publish a review of the operation of the Australia-Chile Free Trade Agreement no later than two years after its commencement in order to assess the ongoing relevance of concerns expressed about the agreement, such as the maintenance of sanitary and phytosanitary measures, the impact on the horticulture industries, intellectual property, 457 visas, and labour and environmental standards. I will certainly be monitoring these issues during the two-year process. I have no doubt those in the horticulture industry will also be monitoring them, given their concerns with regard to biosecurity and phytosanitary issues and given the concerns expressed by horticulture leaders during the recent melamine problem in China. According to the Countryman of 9 October, media reports from China claimed that ‘excessive’ amounts of melamine had been found on Chinese lettuce, tomato, mushroom, watercress and potato. In the article, AUSVEG chairman David Anderson, consumer advocate Choice and Apple and Pear Australia manager Tony Russell called for more testing of Chinese produce. According to the article, Mr Anderson also said that ‘testing of imported produce should be increased at least to the level Australian growers are tested’.

Almost 53, 000 children had been taken to hospital after drinking milk thought to have been contaminated by the industrial chemical melamine. Melamine, normally used in making plastics, was first found in infant milk formula but has since been detected in a range of products with dairy ingredients, prompting a string of countries to ban or recall Chinese dairy imports. The Chinese scandal stems from the practice of adding melamine to watered-down milk to give a reading of higher protein levels. Food Standards Australia and New Zealand issued a media statement on 9 October, which stated:

At this stage we can find no evidence that fruit and vegetable imports are unsafe but it’s certainly something we’re looking at.

I, along with the rest of the coalition, believe it is important that the recommendations of the Joint Standing Committee on Treaties are taken very, very seriously and given due and major consideration when the free trade agreement is reviewed, given how critical agriculture and horticulture are to Australia. Our top agricultural exports in 2007 were beef, wine, wool, meat excluding beef, wheat, milk and cream. The Department of Agriculture, Fisheries and Forestry report Australian Food Statistics 2007 said Australian farmers produce almost 93 per cent of Australia’s domestic food supply—and, I would say, by majority, some of the highest quality food in the world. But we all seem to take the farmers and our access to this quality food for granted. We assume farmers will always be there and we assume they will keep producing high-quality food even when they are not making commercial returns for their efforts.

ABARE in 2007 stated that Australia also exports 61 per cent of total agricultural production. In terms of value, this represents around 80 per cent of the total gross value of Australian agricultural production. ABARE also said: ‘Despite the worst drought on record, Australia’s farm exports earned the country $27.6 billion in 2006-07. This represents 20 per cent of total commodity exports and 16.3 per cent of all Australian merchandise exports.’

Farmers are now facing a review of drought assistance measures by the Productivity Commission, having to seek independent advice to determine whether their business is viable in the long term before being considered for drought aid. The NFF states that Australia remains among the least subsidised farming nations on earth. According to the NFF, by comparison overseas farmers enjoy unbelievable levels of government assistance as a matter of course. For example, among our major trading partners, in Korea it is 63 per cent; Japan, 53 per cent; the European Union, 32 per cent, Canada, 23 per cent; and the United States, 11 per cent.

According to modelling by Econtech in their report titled Australia’s Farm-Dependent Economy Report 2005, Australian farms and their closely related sectors generate $103 billion a year in production. The Productivity Commission, in its research paper Trends in Australian Agriculture 2005, shows that over the last 30 recorded years Australian farms have consistently achieved average multifactor productivity growth of 2.8 per cent a year. According to the NFF website, no other industry, with the sole exception of telecommunications and information technology, comes close to this achievement. Australian farms drive $28 billion dollars a year in exports and support 1.6 million jobs across our cities and regions.

What is not well understood is that Australian farmers, according to the NFF, invest $237 million dollars a year in research and development. This is farmers actively pursuing innovative technological and environmental advances to be efficient, competitive and sustainable. Make no mistake, Australian farmers are some of the best in the world. They have had to be to survive, particularly when they compete in such highly subsidised international markets. But they often do not receive the respect they deserve. Recently an article in the Busselton Dunsborough Times quoted young dairy farmer Brynley Jenkins talking about the good and bad points of being a farmer. In part, he said: ‘In reality it’s one of the hardest businesses to run. The perception is the other way around.’

The NFF also acknowledges that farmers occupy and manage 61 per cent of Australia’s landmass, contributing over $3 billion of their own money to the environmental management of Australia’s natural resources and ecosystems. It says farmers are meeting growing community and consumer expectations about quality, choice and affordability while meeting Australia’s mounting food security needs.

But farmers are concerned that the fluctuation of the Australian dollar is impacting on their bottom lines in international markets—for instance, in Japan. In a recent issue of WA Business News, Margaret River Premium Meat Exports director John McLeod said:

It’s been quite difficult actually, in that trying to fix contracts with Japan for instance, we would normally be doing contracts for six-month periods …

We were in the process of negotiating the next six-month period when all this happened and the dollar started falling out of bed.

Therefore, the recommendations of the Joint Standing Committee on Treaties must be followed through and the Department of Foreign Affairs and Trade should publish a review of the operations of the Australia-Chile Free Trade Agreement. What will the process be if the concerns are upheld? How will this be covered in the legislation? What additional government resources have been allocated in the budget and forward estimates to cover the additional phytosanitary measures required to monitor the imported produce and what additional resources and scrutiny will be applied?

I support the free-trade agreement. It will promote stronger trade and commercial ties between participating countries and open up opportunities for Australian exporters and investors to expand their business into key markets. As mentioned previously, our position on these bills is that we support the free trade agreement. Whilst I strongly believe this, we need to adhere to the recommendations of the standing committee.

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