Warren Truss (Wide Bay, National Party, Leader of the Nationals) Share this | Hansard source

The Customs Amendment (Australia-Chile Free Trade Agreement Implementation) Bill 2008 and the Customs Tariff Amendment (Australia-Chile Free Trade Agreement Implementation) Bill 2008 will give effect to the Australia-Chile Free Trade Agreement, and so they are significant in the history of the relationship between our two countries. I was the Minister for Trade at the time that these negotiations commenced, and on 18 July 2007 I was very pleased to be announcing that Australia had decided to proceed with the free trade agreement negotiations with Chile. I said at the time:

These negotiations offer an excellent opportunity to develop a comprehensive and ambitious bilateral free trade agreement … which would eliminate barriers to trade in goods, improve conditions for services exports and investment, and offer meaningful commercial opportunities for Australian exporters.

The Government’s decision comes after consultations with Australian industry, states and territories and federal agencies, and bilateral officials’ meetings.

The trade between Australia and Chile is not huge, but it is our third largest trading partner in Latin America. The two-way trade in goods and services was valued at A$574 million in 2006 and A$856 million in 2007. Perhaps the most significant part of our relationship, however, has been in relation to investment in Chile. Australian companies have significant investments in Chile, valued at an estimated $3 billion.

The decision to undertake free trade discussions with Chile came after extensive early discussions. These discussions followed an announcement by the government on 8 December 2006 of in-principle support to commence a bilateral FTA negotiation process with Chile with a view to developing a comprehensive free trade agreement to strengthen and deepen the trade relationship. The initial stage of the FTA process was conducted in the first half of 2007 and involved officer-level bilateral meetings with Chile and consultations with domestic stakeholders. Preliminary meetings were held in Santiago in February and April 2007 to discuss the time frame for negotiations and the scope of the agreement and in particular to compare the detail of our respective FTAs with the United States. Consultations were held with Australian industry at about that time as well in many of our capital cities, and there were teleconferences held with businesses in Tasmania. In total, 76 stakeholders were consulted, and the then department received 13 written submissions. Domestic consultations at the time showed that there was considerable support from Australian businesses for an FTA with Chile, particularly from the mining and energy sectors, which participate in Chile’s strong minerals industry, particularly in copper and gold. The growing market for energy—coal, renewable energy and possibly LNG—was also of considerable interest.

It is important to note that Chile has trade agreements involving between 50 and 60 countries. They have more free trade agreements than any other country in the world. Australia has also had considerable experience in negotiating free trade agreements. We are one of only a handful of countries that have agreements with the United States. That meant that a lot of the fundamental framework discussions, which often take many years in negotiations with other countries, were essentially already done. It was a matter of checking notes and sharing our experiences in relation to our dealings with the United States, and it was therefore possible to take significant chapters from the agreements that we both had with countries like the United States to form the basis of this FTA. So the negotiations proceeded very quickly indeed and then finally came to fruition only about 12 months after they originally began. That was a remarkably short period for trade negotiations and agreements to take—in fact I suspect unprecedented in our discussions. As I said, both countries have existing FTAs. We both have well-developed legal systems. We have an understanding of the issues and therefore speedy negotiation was possible.

There has been a high level of support in Australia for this free trade agreement but it would be unfair not to acknowledge that there are industries that have had concerns. Those industries have been particularly in the horticulture and salmon sectors. I am not saying that there are not other industries that have had some concerns, but those two have been the groups which have been most vocal in expressing concern. The member for Mallee in his supplementary statement to the treaties committee report drew attention to some of those issues. He said:

Opposition to this Free Trade Agreement with Chile has a lot to do with its timing and its potential damage to the horticultural industries of regional Australia. This Australia-Chile agreement has been processed hastily and the interests of an important commodity sector ignored as a result.

The signing of an Australia FTA has the potential to force fast tracked negotiation for phytosanitary access for fresh Chilean horticultural produce into Australia (particularly table grapes).

He went on to emphasise that Horticulture Australia had expressed this concern in its submission where they said:

It is the firm expectation of the Australian Horticultural Industry that signing of the Australia-Chile FTA will bring considerable pressure for Australia and Chile to negotiate and substantially grant phytosanitary access for Chilean fresh horticultural produce in Australia. This view is supported by direct advice provided by the Chilean horticultural industry and traders.

I have to say that all through the negotiations there were reports coming from Chile that the horticulture industry in that country felt that the negotiation of an agreement of this nature would give them some priority access through the Australian biosecurity arrangements, that their products would gain a priority over others, and that we might make in Australia concessions in relation to our quarantine requirements arising from this agreement.

I hope that the minister in his summing up will place some emphasis on this concern. I believe that Australia gives the highest priority to science in determining its market access decisions. I hope that we will not make decisions that would put in danger the pest- and disease-free status that our domestic industries enjoy and that we would not endanger our natural wildlife or environment by risking the introduction of a disease. That has been a bipartisan position in relation to biosecurity issues. We may have disagreements sometimes about the science and the way in which it is developed, but I believe that both sides of politics have accepted this as a fundamental principle. It is an extraordinarily valuable asset to be disease and pest free and we must do whatever we can to preserve that. I would be very surprised if the minister, my successor in the trade portfolio, would have agreed to anything which would have in any way compromised Australia’s positions in that regard. If he has, I would be very angry with him.

I think it would be important for the record for him to state very clearly and give the assurance to the people in the horticulture sector that no special favours will be given to Chile and that no concessions will be made in relation to our pest- and disease-free status as a result of this agreement. We had an extensive chapter in the Australia-US Free Trade Agreement that dealt specifically with these issues. It put in place a consultation process but, very clearly, Australia was not prepared to make concessions to the US, nor were we prepared to make them in any of the other FTAs that we have made. I think it is important that those assurances be given again in our relationship with Chile.

The Australian horticulture industry has been concerned about the potential impact of imports from Chile on the Australian horticulture sector. Indeed, there is a reference in the honourable member for Mallee’s report about the number of jobs that there are in the Australian horticulture sector. The summer fruit industry—the peaches, plums and nectarines, a lot of which are grown in his electorate—employs about 10,000 workers, with 6,000 in the Swan Hill area alone. It has a $300 million gross value of product, so it is quite a significant industry. They are concerned about the potential for imports into Australia as a result of this FTA.

As a result of the FTA Australia is giving a commitment to reduce our tariffs, but it needs to be emphasised that there is little or no tariff barrier now for horticultural exports from Chile to Australia. For instance, the biggest single export in the horticultural sector from Chile to Australia is, in fact, frozen raspberries. In 2006 nearly $4½ million worth of frozen raspberries were exported to Australia. They were tariff free before this agreement was negotiated, so there will be no impact on the biggest single horticultural export to Australia—it will continue to be tariff free, as it has in the past. Other significant exports include products like dried grapes and dried prunes, and the tariff there is four per cent—again, quite a small level, and that is on a declining scale too. The currency movements over recent times would have a much greater impact on the competitiveness of those exports than the tariff. I think the concerns about the reductions in tariff have been somewhat overstated.

The salmon industry is another industry that has been concerned. We imported in that same year, 2006, about $2.2 million worth of salmon. Again, there is no tariff on Chilean salmon and there has not been for quite some time. This agreement will have no impact on the volume of salmon coming into Australia—it is already tariff free.

I think that some of these concerns may be a bit overstated. The primary concern, in addition to summer fruits, has been table grapes. We all know that Chile is a major supplier of table grapes and grows them quite well. There are a range of pest and disease issues but, subject to conditions, Chilean table grapes have had access to Australia since about 2005, and none have come. Even though Chile has had the access and there has been no tariff barrier, they have not chosen to export them to Australia. I think the main reason for that is the difficulty in actually transporting them from Chile to Australia. One of the things that we do not have much of is regular freight transport between Chile and Australia. Ships rarely ply the route; there are daily air services but there is limited hold capacity in an aircraft, and if you are going to airfreight grapes or something like that to Australia it will be very difficult to price them competitively. These natural barriers of distance are going to be the most significant deterrents to increased trade between Australia and Chile in that area of horticultural products.

Having said that, it is a fact that this is only the second free trade agreement that Australia has negotiated with a country that is not counterseasonal to Australia. Our other free trade agreements are with Northern Hemisphere countries and so fruit, vegetables and other products grown there are counterseasonal to what is grown in Australia. The only other free trade agreement that we have with a Southern Hemisphere country is with New Zealand. Of course there has been extensive trade, including in horticultural products, between Australia and New Zealand. That is part of the reason the Australian horticultural industry has some concern—the very time that Australian, particularly southern states, grapes and other products are in the market place is the time the Chilean producers will also be in the peak of their season and therefore be able to supply grapes perhaps at competitive prices.

There were concerns when US grapes were allowed into Australia—that that would devastate our local industry. But in practice that did not happen. In fact, the US grapes are arriving here at such a price that any Australian farmer would be happy to get that kind of return for their product. It is somewhat counterseasonal for the southern industry, but not for grapes grown in Western Australia or in Queensland; in those states there is some competition but it has not had a significant adverse effect on the local industry. So we need to be conscious and aware of the concerns of the horticulture sector and indeed other industries that are anxious about the level of competition. But in reality I am confident that Australian producers have the quality and the capacity in the industry to be able to produce and supply these products competitively.

The biggest threat to the Australian horticultural industry is not imports from Chile; it is the availability of water, from the Murray-Darling system in particular, to water the orchards and vineyards. The current buyback that is being instigated by the government is a genuine threat to our horticultural production capabilities in the future. The dryness in the river system at the present time is also a threat because even those people who have got allocations, particularly in Victoria, are getting only a very small proportion of their entitlement, and that is a very serious threat to the industry. Those are issues we ought to be addressing in Australia. I am deeply disturbed about the way in which the government is approaching the rehabilitation of the Murray-Darling Basin system. Instead of spending the allocated money on improving the infrastructure, both off-farm and on-farm, so that we in fact make more water that can then be used in the environment and through the whole of the system, the government is taking the lazy way out by simply buying up entitlements, even though there is no water to match them at the present time, and permanently putting out of production some of those keys areas. Those are the real threats to the industry in my view rather than this particular free trade agreement.

The final comment I would like to make is in relation to the strength of the relationship between Australia and Chile, particularly in an economic sense. Australian companies are really significant investors these days in Chile. We have been involved in a large number of very significant projects. BHP Billiton holds a 57.5 per cent stake in the world’s largest copper mine at Escondida, located in northern Chile, and that is a very substantial project. They have announced a tender to build a 340 megawatt coal-fired power plant—again real opportunities for Australian industry to be involved in this plant, its design and construction and eventually presumably the supply of coal. The Santa Barbara mine in which Admiralty Resources has a 50 per cent stake has commenced production of iron ore in Chile. The Australian company SMC Gold has had success with its Cinabrio mine north of Santiago and is at last returning a profit. Equatorial Mining Limited has a 39 per cent interest in the Chilean company Minera El Tesoro. Pacific Hydro has a 50 per cent stake in the joint venture constructing the 155 megawatt La Higuera plant in Chile. There are a number of other significant investments of that nature.

Our major exports to Chile include coal, civil engineering equipment, specialised machinery and optical instruments. Australian imports from Chile include copper, nonferrous base metal waste, pulp, wastepaper, pig iron and wood. The two-way trade favours Chile. They export more to us than we do them. There is also a two-way trade in services, which in 2007 was valued at over $300 million. Again, that is in Chile’s favour, but this agreement will, hopefully, open up new opportunities for Australian firms to supply to the Chilean government and other agencies and help boost the relationship in that regard.

Australia and Chile are firm friends. This agreement has been sought particularly by the Chileans for quite some time. The negotiations were smooth and have come to what I believe is a satisfactory outcome. As the minister who commenced the discussions I am very pleased to now speak in support of the necessary legislation to give effect to this agreement.

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