Tony Zappia (Makin, Australian Labor Party, Shadow Assistant Minister for Medicare) Share this | Hansard source

This legislation, the Government Procurement (Judicial Review) Bill 2017, implements commitments that the Australian government is signing up to under the Trans-Pacific Partnership agreement and possibly the World Trade Organization Agreement on Government Procurement whereby, if an entity is aggrieved by the awarding of a government contract, that entity has an ability to appeal that decision through the Federal Circuit Court of Australia, which is an easier process than what currently exists. The appeal would challenge the government's compliance with its own Commonwealth Procurement Rules, which in turn must comply with Australian obligations under free trade agreements, other World Trade Organization obligations and the government procurement agreement which the government is currently negotiating.

The comprehensive and progressive Trans-Pacific Partnership agreement has been mainly dealt with via other enabling legislation that was debated in this place a few days ago. In that debate, Labor highlighted several shortfalls with the TPP. Firstly, there is the inclusion of investor-state dispute resolution clauses which give overseas corporations rights that domestic corporations simply don't have. Secondly, there is the recognition of overseas skills that may not meet Australian standards. Thirdly, there is the ability to more easily recruit overseas labour in Australian workplaces. And, fourthly, there is the likelihood that pharmaceutical companies will have longer periods of monopoly over costly medicines.

What has not been talked about so much but should be of real concern to all Australians is that under the TPP and the government procurement agreement overseas entities can bid for Australian government work on an even playing field with Australian bidders. That means that, other than where exceptions are provided for within the agreements, Australia cannot give favourable treatment to local entities for government contracts. That may sound like a good idea, but when analysed it not always is. If the government does give preferential treatment, under this legislation the aggrieved entity also has an easier appeal process.

The enabling legislation for the TPP is currently before the other place, and the government procurement agreement has already been signed by some 47 countries around the world. Nine other countries, including China and Russia, are currently in accession talks to join the WTO GPA. In June 2018, Australia received support to join the GPA and it is expected that final approval will be granted in October of this year—that is, next month. So, from next month onwards, we may be a full member of the government procurement agreement that currently exists amongst 47 countries, with another nine also in the process of getting approval. At this point in time, Australia is not a signatory to the GPA, but it certainly may well be and, like the TPP, the GPA—that is, the government procurement agreement—has its own risks for Australia.

Members of the House would recall that it was only about a year ago that there was a Joint Select Committee on Government Procurement that looked at the issue of government procurement within Australia and how we could ensure that that procurement better benefited local Australian companies. There were recommendations at the end of that inquiry. Recommendation 8 of that committee report said:

The Committee recommends that, in negotiating future trade or World Trade Organisation agreements, Australia not enter into any commitments that undermine the Australian government's ability to support Australian businesses.

The government's response to the report was pretty weak, if I should say so. Indeed, with respect to recommendation 8, the government's response was:

Noted. The Australian Government enters into commitments in trade agreements that are aimed at supporting Australian business, in particular to open up new market access opportunities internationally and to put in place a framework of rules and standards that support transparency and competition on a level playing field.

In other words, it didn't support a process that would have ensured that Australian businesses would have got preferential treatment but, rather, the opposite.

In 2015-16 Commonwealth agencies reported entering into 70,338 contracts valued at $56.9 billion. My estimate—because accurate figures are simply not available—is that the $56.9 billion figure that the Commonwealth spends would probably be doubled if state and territory government procurement were also included. That means that in this country around $120 billion of government procurement is spent each year. That's $120 billion that could be directed to support Australian businesses and their employees and the economy of this country. Yet all the local benefits of that procurement are increasingly being chipped away by free trade agreements—and now the Trans-Pacific Partnership agreement and, soon to come, the World Trade Organisation's government procurement agreement.

Even with the exclusions and the reservations that are carved out within those agreements, every agreement weakens the Australian government's rights to favour Australian businesses. This legislation weakens those rights even further, because it makes it easier for aggrieved parties—and that includes the foreign entities—to challenge Australian contracts. In the past, there may have been a process—and I know that there is some process where the government does favour local businesses, particularly small and medium ones. But in the future, if the government chooses to do that and it has signed up to the GPA and the TPP, it will be easier for those overseas competitors to challenge the decision to award those contracts. The argument that what Australia may lose by being a signatory to such an agreement is more than offset by what Australia may gain from winning contracts in other countries is wishful thinking at best. The figures on the trade agreements that Australia has signed to date simply do not show a net gain to Australia, or there are no figures on which we can make accurate comparisons. The fact that there are no figures is of itself concerning, because it indicates that the claims about the benefits to Australia about these agreements are simply not met.

But the risk if Australia joins the government procurement agreement is even greater for this reason. Most of the agreements we have entered into to date rely heavily on the export of agricultural products and minerals in order to justify the benefits that are to come to Australia. However, with the GPA, no minerals and no agricultural products are to be exported to offset the possibility of overseas companies bidding for government contracts, which are in most cases services or the building of infrastructure. Additionally, whereas Australia acts ethically and complies with the spirit of trade agreements, that can't be said of all the countries we have signed agreements with. Indeed, I refer to the 47 countries from earlier on, with another nine to join the GPA in the future—possibly the near future. Governments in other places have been known to use what we call 'behind the border' barriers to make it much harder for overseas jurisdictions to continue doing business with them than it is for their local companies.

A good example of that is that it was only a couple of years ago that it was brought out that the Reserve Bank of Australia's subsidiary, Securency, had got caught up in a note-printing scandal. The reason it did was that we had a product that was wanted overseas—that is, the printing of banknotes—and we could do so better than anybody else. But the reality was that, in order to win the contracts, bribes had to be paid. That's what happened with the Securency scandal. That just highlights that, whilst Australia signs agreements and then ethically goes about complying with them, it's not always the case with overseas jurisdictions, which can use all sorts of tactics to continue to favour their local businesses. That is a concern with this legislation and, indeed, with all of the trade agreements that Australia has to date been a signatory to.

If Australians cannot rely on the Australian government to give preferential treatment to Australian businesses in the issuing of government contracts then they cannot expect any support whatsoever with respect to the trade agreements that the government is prepared to sign up to. With government contracts, the government is in total control of who gets the work and how it is awarded. So, if we can't rely on the Australian government for the $120-odd billion dollars of work that governments give out every year, then what hope do Australian businesses have of being supported by the government in respect to overseas contracts and in respect to the conditions within these trade agreements?

The government could easily fix the problem it has, where it says that it cannot give preferential treatment to Australian businesses, simply by broadening the meaning of the words 'value for money' in respect of the criteria used when it comes to the awarding of Australian government contracts. The definition of 'value for money' should include whole-of-life benefits that accrue when a contract is awarded here within Australia and that should also include the additional revenue that the government gets back in taxes both by the sale of the product and from the workers who work there and pay pay-as-you-go income tax and the like. It should be a whole-of-product cost and not simply the bottom-line price as to how the product can be delivered.

Unfortunately, that is not the case and that is why, in my view, Australia doesn't always get the best deal with respect to these contracts. Deputy Speaker Georganas, you would be fully aware of this with respect to the Rossi Boots factory that was in your electorate. It lost a contract simply because it was undercut by an overseas supplier. But if you had factored in all of the benefits to the local economy and put a dollar value to those factors, it would have been the case that Rossi Boots would have got the contract. It is not unreasonable and it is not unethical to include the whole-of-life costs of the product when a contract is awarded, whether it is a product or whether it is a service, and all of the income that accrues to the government should be factored into the final decision as to who gets it.

I haven't seen, and none of us have seen, the actual text of the government procurement agreement that the current government is negotiating. As with all of these agreements, we only ever see the text once it has been agreed to. But I would have thought that, at the very least, if we're going to enter into new agreements, we should—with that agreement—also carve out protections with respect to national treasures of artistic, historical and archaeological value and we should also carve out any measures for the economic advancement, health, welfare and social advancement of our Indigenous Australians. If that can be done in the GPA then I believe it ought to be done and we should be doing our best to ensure that it is done.

I finish with this comment, and it relates to a submission made by Dr Elizabeth Thurbon, who contacted the inquiry committee with respect to government procurement:

… World Trade Organization (WTO) membership requires governments to curtail the use of local content requirements, direct export subsidies and preferential government procurement policies (which involve using government purchasing to support local firms).

That quote, where Dr Thurbon makes it clear that we cannot give preferential treatment to Australian businesses, is concerning. I hope the government ensures that that is not the case with respect to new agreements that we enter into.

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