Kevin Rudd (Griffith, Australian Labor Party, Shadow Minister for Foreign Affairs and Trade and International Security) Share this | Link to this | Hansard source

I rise today to speak on the Customs Legislation Amendment (New Zealand Rules of Origin) Bill 2006. The bill amends Australia’s customs legislation to give effect to an agreement between Australia and New Zealand to amend the rules of origin under the Australia-New Zealand Closer Economic Relations Trade Agreement, ANZCERTA. Specifically, the bill replaces the existing regional value content, or RVC, rules of origin with the change of tariff classification, or CTC, rules.

Rules of origin are used to determine which products qualify as domestically produced such that they can receive preferential tariff treatment under the FTA. Under the current RVC rules, a New Zealand product exported to Australia can receive preferential tariff treatment if the last production process occurred in New Zealand and at least 50 per cent of the cost of production also occurred in New Zealand. Under the proposed CTC rules of origin, for a good to receive preferential tariff treatment it must have been substantially transformed. This is determined by whether the good changes its tariff classification under the harmonised system of tariff codes, a system defined by the World Customs Organisation.

In a world of global supply chains, in which various processes of manufacture for one finished product may take place in several countries, the RVC system of rules is becoming increasingly irrelevant to modern production methods. Under the current RVC system, should the final process of manufacture occur in a third country, the product will not qualify for preferential treatment no matter how minor the final process. This is the case even if more than 50 per cent of the cost of manufacture has occurred in Australia or New Zealand.

In a report on the ANZCERTA rules of origin in 2004, the Productivity Commission concluded that the current system of rules of origin was out of date and acting as a constraint on trade. The Productivity Commission outlined the following advantages of the CTC method in general: (1) it reduces compliance costs; (2) it avoids the impact of price changes or exchange rate movements on origin status; (3) it increases certainty; and (4) it requires minimal records for Customs audits. The CTC method was also adopted in the Australia-US Free Trade Agreement and the Australia-Thailand Free Trade Agreement. This consistency makes compliance simpler for companies exporting to two or three of these countries.

On the whole, Labor supports the amendment to the rules of origin since it provides for an up-to-date and consistent method of prescribing preferential tariff treatment. However, our concern is that, through the government’s inadequate consultation process, at least one company could needlessly be negatively affected by the change to the point where a significant number of jobs may be at risk.

While we are considering a key piece of legislation that affects Australia’s trade, we should take some time to consider Australia’s recent trade performance. Australia is experiencing its worst trade performance on record. Tomorrow, the Australian Bureau of Statistics will release data on Australia’s trade performance in October. Australia has already had 54 consecutive monthly trade deficits, the longest run of trade deficits on record. Australia’s annual trade deficit for 2005-06 was $14.5 billion; that is, Australia imported $14.5 billion more in goods and services than it exported. Each trade deficit adds directly to our current account deficit. The trade deficit, together with Australia’s interest and dividend payments on existing foreign debt, equals our current account deficit. In 2005-06, Australia’s current account deficit was $54.4 billion, marginally lower than the record $57.4 billion current account deficit in 2004-05.

Every month, every quarter and every year that Australia imports more than it exports, the money to pay for the shortfall must come from somewhere. To cover our current account deficit, Australia borrows from overseas. As a result of the current account deficit in 2005-06, Australia’s foreign debt grew by a further $60 billion to $494 billion; that is, Australia now has a foreign debt of close to half a trillion dollars. To put that in some perspective, that equates to $24,000 of debt for every man, woman and child in this country.

This has occurred at a time when Australia has experienced its strongest terms of trade in 30 years. Driven by a boom in demand for resource commodities, the prices of Australia’s resource exports have increased significantly over the past three years. The real problem has not been the prices of our largest exports, but the failure of the volume of exports to pick up in response. Between 1983 and 1996, Australia averaged growth in export volumes of 8.4 per cent per annum. However, over the last 10 years this has slowed to just 3.8 per cent per annum; what is even more concerning is that it has declined further to average growth of just 0.9 per cent per annum over the past five years.

Australia’s exports of manufacturing and services have been affected in a similar way. The volume of Australia’s exports of elaborate manufactures averaged growth of 12.9 per cent a year between 1983 and 1996. Over the past 10 years growth has more than halved, averaging 5.6 per cent a year, and over the past five years it has slowed further to just 2.7 per cent a year. The volume of services exports averaged yearly growth of 9.3 per cent between 1983 and 1996. This has slowed to an average of just 2.6 per cent per annum over the past 10 years. Worst of all, over the past five years the volume of services exports has recorded an average decline of 0.7 per cent per year.

By taking a strategy that involves Australia becoming merely China’s quarry and Japan’s beach, the Howard government has chosen by and large to ignore our high-tech services and manufacturing industries—and particularly their capacity to contribute to the country’s overall export performance. In 2005, of total world trade of $12.5 trillion, the largest share—$7.3 trillion, or 58 per cent—was accounted for by trade in manufactures. The second largest traded item was services at $2.4 trillion or 19 per cent. Natural resource commodities accounted for $1.75 trillion, or just 14 per cent, of world trade. By taking a narrow approach the government is not just putting all our eggs in one basket; it is putting all our eggs in the smallest basket of world trade.

Australia’s trading relationship with New Zealand is one of the bright spots of Australia’s overall trade performance. In 2005-06, Australia exported $11.9 billion worth of goods and services to New Zealand, which comprised $8.7 billion in goods exports and $3.2 billion in services exports. This makes New Zealand Australia’s fifth largest export destination after Japan, China, the United States and the Republic of Korea.

New Zealand is one of the few major trading partners with which Australia has a trade surplus. In 2005-06 Australia’s goods and services trade surplus with New Zealand was valued at $4.3 billion, though this is a seven per cent reduction on the $4.6 billion recorded in 2004-05. The decline in the trade surplus was due to a fall in Australia’s exports to New Zealand of 1.8 per cent at the same time as Australia’s imports from New Zealand rose by 1.6 per cent. Australia’s goods exports to New Zealand declined by 4.5 per cent in 2005-06, while exports of services managed solid growth of 6.7 per cent.

Looking at longer run trends, we see that the growth in Australia’s exports to New Zealand follows a similar pattern to Australia’s overall exports growth performance—that is, one of slowing growth under the current government. Data on Australia’s exports of goods by country is only available back to 1988-89. However, for seven years, between 1988-89 and 1995-96, under the previous Labor government, exports of goods from Australia to New Zealand averaged an annual growth of 13.9 per cent. This compares to average annual growth of just 4.5 per cent over the 10 years under the current government.

The importance of New Zealand to the Australian economy is highlighted when the breakdown of Australia’s exports to New Zealand is considered. New Zealand is rare among Australia’s trading partners in that our largest export to New Zealand is in the services sector. In 2005-06, Australia exported $2.1 billion of personal travel services to New Zealand, placing it third behind China and Japan.

Despite being only Australia’s fifth largest exports market overall, New Zealand is our largest destination for elaborately transformed manufactured exports. Australia’s elaborately transformed manufactured exports to New Zealand were valued at $5.5 billion in 2005, which was 21 per cent of our total ETM exports globally. In fact, apart from refined petroleum, the top five Australian goods exports to New Zealand are all elaborate manufactures. Specifically, they are passenger motor vehicles, medicines, computers and paper products. In 2005, Australia exported $450 million worth of passenger motor vehicles to New Zealand, making it the second largest export destination for the Australian automotive industry. At a time when Australia’s exports base is narrowing, this makes New Zealand a very important trading partner for Australia.

Australia is also an important trading partner for New Zealand. In fact, Australia is New Zealand’s largest trading partner, with Australia accounting for 21.4 per cent of New Zealand’s exports in 2005 and 20.9 per cent of its imports. New Zealanders also invest heavily in Australia. Total investment by New Zealand in Australia was valued at $24.3 billion in 2005, making it the country with the eighth largest investment in the Australian economy. The relationship is not just measured in dollar terms; it can also be measured by the influx of people. In 2005, 18,500 New Zealanders migrated permanently to Australia, making New Zealand the second largest source of migrants for Australia behind the United Kingdom.

Some argue that the Australia-New Zealand Closer Economic Relations Trade Agreement could be said to be our only successful bilateral free trade agreement to date. In general, preferential bilateral free trade agreements have a number of drawbacks. First, bilateral agreements can lead to trade distortion rather than trade creation. That is, when two countries sign a bilateral agreement, the lower preferential tariff may induce them to import from their new partner because the reduced tariff makes that country’s imports cheaper. However, the most efficient and lowest cost producer may be a third country whose product becomes uncompetitive since they do not receive the lower tariff rate. Hence, trade is merely diverted from a low-cost country to a higher cost country.

Second, bilateral agreements create a spaghetti bowl of rules of origin. Each bilateral agreement has its own rules of origin, sometimes using different methodologies. With the proliferation of bilateral agreements and attached rules of origin, it becomes time consuming and costly for companies to adhere to them all. This can reach the point where it becomes cheaper for an exporter to pay the higher tariff rather than comply with the rules of origin and receive the lower preferential tariff under an FTA.

Third, bilateral free trade agreements take scarce resources and diplomatic focus away from the main game in liberalising world trade, which is the multilateral agreements currently under negotiation through the World Trade Organisation. This is clearly the case for Australia’s prosecution of the Doha Round of WTO negotiations—and these, of course, have run significantly into the mud in recent times.

At the same time as we are negotiating the Doha Round, Australia has also been negotiating bilateral agreements with Singapore, the United States, Thailand, the United Arab Emirates—now expanded to the Gulf Cooperation Council—China and Malaysia. There have also been preliminary discussions and studies on bilateral agreements with Japan and Chile. This has clearly diverted scarce resources away from the negotiation of the Doha Round.

What is more, Australia’s lead in the rush to bilateral agreements has diverted the attention of other countries from the Doha Round. Bilateral agreements provide an easy fallback position for countries negotiating the Doha Round. It is easy to say, ‘If the Doha Round fails, we can always have the bilaterals.’ This is particularly disappointing given that Australia, through its leadership of the Cairns Group, is pivotal in bringing the Uruguay Round to a successful conclusion. Further, the empirical evidence to date for Australia on bilateral agreements is not good; in fact, the data is disappointing. The Australia-United States Free Trade Agreement and the Thailand-Australia Free Trade Agreement came into effect on 1 January 2005. The Singapore free trade agreement came into effect in July 2003. Australia’s export performance with each of these countries has in overall terms worsened since these agreements came into effect.

Since the Australia-United States Free Trade Agreement came into effect, Australia’s annualised trade deficit with the US has increased by 13 per cent, to $14.7 billion. The government’s commissioned study into the AUSFTA predicted that Australian exports to the United States would grow by $3 billion per annum. In 2005, Australia’s exports to the United States actually fell by $132 million. While it is early days, it has to be recognised that there is a long way to go from the negative growth in exports experienced in 2005 to the projected growth of $3 billion a year anticipated by the government at the time we negotiated the Australia-United States Free Trade Agreement. The government commissioned study on the AUSFTA also anticipated that the largest gains from the agreement would come through the increased investment flows between the two countries. The Department of Foreign Affairs and Trade fact sheet on the AUSFTA stated:

Much of this growth will be generated by the dynamic gains expected from the deeper links the Agreement establishes between Australia and the US, with the CIE finding investment liberalisation the biggest contributor to the projected increase in Australia’s GDP.

However, US investment in Australia has in fact fallen significantly since the agreement came into effect. There are a number of key sectors in the economy that were left out of that agreement. Australian sugar farmers received no additional long-term access to US markets despite Central American countries receiving an additional 100,000 tonnes access per annum under the Central American free trade agreement. I am sure that the member for Dawson, who is currently sitting at the table, would as a fellow Queenslander be concerned about the fact that we have received no additional access to the US sugar market as a consequence of the AUSFTA despite the fact that we were assured at the time that if there were no sugar there would be no deal. It is a pity that promise was not honoured. As a result, Australia’s sugar farmers will continue to be restricted to a quota of just 90,000 tonnes.

Another outstanding concern is the lack of mutual recognition of Australian financial markets qualifications by the United States. Under the agreement, US qualified and licensed brokers are automatically recognised and able to trade in Australia. Australian brokers must go through an onerous process with the US Securities and Exchange Commission to be able to operate in the US.

Australia’s free trade agreement with Thailand has seen our trade deficit with Thailand worsen. In 2004, Australia’s annual trade deficit with Thailand was $1.5 billion. By June 2006, Australia’s annualised trade deficit with Thailand had grown to $1.6 billion.

Australia’s free trade agreement with Singapore has had more time to have an effect on the economy, since it became operational in mid-2003. In 2002-03, Australia had a trade surplus of $162 million with the Republic of Singapore. By 2005-06, this had not only been reversed into a trade deficit but had blown out to a most significant trade deficit indeed. Australia’s exports to Singapore have flatlined over the past two years. In 2002-03, Australia’s exports to Singapore were valued at $6.9 billion. In 2005-06, they were valued at $6.4 billion. Something is going radically wrong with our export performance in relation to the Republic of Singapore. Singapore’s exports to Australia, however, have more than doubled from $6.9 billion to $14.5 billion. It would be interesting to know what is happening in this significant regional economic relationship to see such a radical turnaround in the bilateral trade figures, which has been significantly negative from Australia’s perspective.

In a period when Australia is experiencing its worst trade performance on record, the government’s trade policies appear to be not significantly improving this position. The challenge overall, beyond these bilateral agreements and all the complications that are associated with them, is for this government to join every element of its diplomatic and political energies towards the successful conclusion of the Doha multilateral round.

The Australian Labor Party in government—at a time, Mr Deputy Speaker Kerr, when you were a member of that previous Labor government—actively contributed to the resolution of the Uruguay Round through the sterling contributions of the likes of the late Senator Peter Cook. Through those agencies, we were able to bring to the negotiating table an influence which brought that round to a successful conclusion—which, for the first time, included agriculture. There you have it. It was a Labor government—those opposite would say the ALP does not have a natural connection with the agricultural constituency, but I beg to differ; I grew up on a farm myself—that delivered in terms of getting agriculture onto the WTO agenda. We are proud of that fact.

But what we are concerned about is that there has been a sapping of the diplomatic and political energies behind the multilateral trade effort. What I know of the Department of Foreign Affairs and Trade is that, at the end of the day, there is a limited number of qualified people who are charged with the negotiating brief. You cannot expect officials to pull off miracles when they are being asked to undertake multiple tasks at the same time. These bilateral deals are personnel intensive. The deal with China is exceptionally personnel intensive. When we are simultaneously seeking in the last period of the Doha negotiating round to try to bring that most critical round to a conclusion, I question and question again the extent to which our department is being asked to do too much, given the limits to its bureaucratic resources, with a Prime Minister who is not fully seized of the significance of the successful conclusion of Doha in terms of the political capital he is prepared to inject into this exercise.

Recently, I reflected on and read again of the successful conclusion of the Uruguay Round. When I read the speeches by Minister Dawkins, Minister Cook, Prime Minister Hawke and Prime Minister Keating, what struck me time and time again was that, each time these ministers and prime ministers travelled abroad, the successful conclusion of the multilateral round was at the top of the prime ministerial list of priorities; it was at the top of the negotiating list for whichever country they were visiting around the region and around the world. I do not see that evident in Prime Minister Howard’s list of priorities when he travels the region and the world; it is not accorded the same level of priority. Instead, this government has placed a large number of its eggs in one basket—that is, a series of bilateral agreements—and the figures which begin to produce themselves off the back of these bilateral agreements are not, thus far, encouraging for Australia.

Leaving aside the broader point—not just the philosophical point but the basic economic theory that global trade liberalisation enables all economies to advance and to grow—it provides the most efficient allocation of resources across the global economic system, as opposed to bilateral arrangements which can be trade distorting, although not necessarily. Certainly it delivers complexity to exporters-producers—the spaghetti bol I referred to before.

The legislation which is the subject of debate in the House tonight is the Customs Legislation Amendment (New Zealand Rules of Origin) Bill 2006. I have canvassed our approach to the legislation. I have indicated that we have concerns about the impact of this legislation and this agreement as it relates to a particular firm. My colleague the member for Gellibrand will move an amendment at the appropriate time. We would ask the government to give that amendment strong and appropriate consideration, given the impact that will be felt by one particular group of employees.

Beyond that, could I simply conclude by saying that, for Australia, the economic relationship with New Zealand is of critical importance. The political relationship with New Zealand is of critical importance. We look to the South Pacific—and I notice my colleague the member for Maribyrnong, the shadow minister for the Pacific Islands, sitting at the table right now—and, were it not for New Zealand and many of the countries where we are currently engaged politically and militarily in the South Pacific, we would be in even greater difficulty than we are at the moment. New Zealanders have been strong and positive partners in our regional diplomacy in the South Pacific. However, as I have indicated through my remarks this evening, it is not just as diplomatic partners; the numbers reflected in our bilateral economic relationship show the New Zealand trade relationship is one of the few bright spots in our overall trade horizon when the global data for Australia has been trending negative for almost five years.

Duncan Kerr (Denison, Australian Labor Party) Share this | Link to this | Hansard source

I thank the honourable shadow minister for foreign affairs. My heart warms at his remembrance of times past. Memory sometimes treats us oddly.

Bruce Baird (Cook, Liberal Party) Share this | Link to this | Hansard source

Thanks very much, Mr Deputy Speaker Kerr. It is great to see you in that role after your very impressive stay at the UN. I wish tonight to rise in support of the Customs Legislation Amendment (New Zealand Rules of Origin) Bill 2006. The CER we have with New Zealand is a very important document because a major part of our trade goes to New Zealand. New Zealand represents our largest source of tourists into this country and, likewise, we are the No. 1 source of tourists for New Zealand. In respect of investments in New Zealand, we are No. 1. New Zealand also ranks significantly in this country. Trade both ways is very significant.

The CER was developed in 1983. We have been through the 20th anniversary, when the New Zealand parliament reviewed the CER agreement to consider the issues and the problems, where they still existed. At the invitation of the New Zealand government, I visited the parliament and spoke to people there, and they encouraged the Australian parliament to also look at the issues and problems from our perspective. It is true that the Trade Subcommittee of the Joint Standing Committee on Foreign Affairs and Trade was probably a little tardy but we reviewed the agreement some 23 years after the CER was inaugurated in 1983, and we are about to present the report to parliament.

The Trade Subcommittee found that the CER had served both countries very well. It had significantly developed trade in both countries. It had removed many of the barriers, and it encouraged development. As a result, we moved very much to a free trade environment although we certainly still had the issues around common currency and common borders. In reviewing the CER, it was true to say that, from discussions with industry and departments on this side and on the New Zealand side of the equation, there were no major problems. They were more looking forward—for example, how we could improve the common border situation. There was no great enthusiasm for common currency on either side of the Tasman. We looked at how we could reform telecommunications such that there is a greater ease of relationship between the two countries and without the barriers to investment that exist on either side of the Tasman, as we have two major competitive organisations operating: Telstra and New Zealand Telecom.

Overall, it has been a great success. New Zealand is our major trading partner. We have a very long term relationship. As part of the ANZAC, these two countries are brought together not only commercially but also through a significant emotional attachment. We regard New Zealanders and Australians as being interchangeable on most days—except when we play rugby or cricket against one another and then things change a bit! With respect to the rest of the time, obviously the very significant level of migration from New Zealand into Australia means that we have many New Zealanders in very senior jobs across the whole economic spectrum. In our report, we are looking at the need for trade coordination so that it is easier for a plumber in Australia to get a job in New Zealand and vice versa. This is particularly important when we have very low unemployment levels and as we try to solve some of our skills shortages resulting from the resources boom. That is being addressed by individual trade associations.

This legislation addresses the rules of origin. It was interesting, when the Trade Subcommittee visited New Zealand, that the only major issue raised with us by ministers was the question of New Zealand suits being brought into Australia. They said that some Australian suit manufacturers, based predominantly in the state of Victoria, the member for Maribyrnong’s state, were complaining about the importation of New Zealand suits and that they were unable to supply suits because part of the product was produced offshore. We could really call this legislation the ‘Customs Legislation Amendment (New Zealand Rules of Origin, Especially for Suits) Bill’ because it is all about suits from New Zealand. It is somewhat ironic, when today lots of our footwear and textiles are imported from China and from South-East Asia in large quantities, that we should be arguing with New Zealand over the importation of suits. But that is the way it is: part of it is produced in China and it was decided that we should address it. When the Trade Subcommittee came back from New Zealand we spoke to the Minister for Justice and Customs—you would know that role particularly well, Mr Deputy Speaker Kerr, having been a proud occupant of the role in past times—about the problems that the New Zealanders had raised with us. I am sure there are other very good reasons why this bill was produced relating to other commodities and products, but I am aware that this was one issue which concerned the New Zealanders.

As we know, the Australia-New Zealand Closer Economic Relations Trade Agreement, or ANZCERTA, came into force in March 1983. It was revised and updated in February 2006 and continues to be strong and viable. There are a number of bilateral ministerial meetings on a regular basis designed to look at this issue. One of the issues we had, which will be coming forward in the recommendations, was the need, because it cuts across so many different portfolios, to have one ministry responsible for driving the program. To a certain extent, the Treasury has been in that driving role, and we will see how that develops, but that was one area where it seemed people were not quite sure who was driving the program to ensure we had a common economic union with New Zealand.

The amendments are set to come into force on 1 January 2007. Under the review a preferential entry of goods provides New Zealand goods and services with preferential access to the Australian market by eliminating barriers to trade between our nations in a gradual phase-out process. The first step in this process is to eliminate tariffs on goods which have been either wholly manufactured or substantially manufactured in New Zealand, as defined by the rules of origin. Under these, at least 50 per cent of the cost of producing the goods must be incurred in Australia or New Zealand. Ever since 1990, all goods that have met these rules of origin have been able to be traded duty free between Australia and New Zealand. Due to the nature of changes within our economies—in other words globalisation, which you would have heard a lot about at the UN, Mr Deputy Speaker—some business representatives have seen these rules of origin as a hindrance to growth and further trade. In accordance with one of the current rules, manufactured goods imported from New Zealand are originating and therefore eligible for a preferential rate of duty if the last process of manufacture occurs in New Zealand and the goods satisfy a regional value content requirement. This is totally sensible and totally realistic. Why did we not think of that before? Congratulations to those involved in bringing forward this legislation.

Sometimes, despite the majority of the stages in production occurring in Australia or New Zealand, the final stage is outsourced, thus creating a tariff to be imposed on the good when traded between Australia and New Zealand. This bill implements amendments to the CER that would also allow the change in the tariff classification method to be used, along with a regional value content requirement, to determine whether goods from New Zealand are New Zealand originating goods. The reality is that we have a free trade arrangement with New Zealand and a common economic market. We are bringing products in directly from China anyway with very little tariff, so if the last part of the good is produced in New Zealand then this makes sense.

The CTC approach being adopted through this legislation examines the product’s non-originating inputs and makes a determination as to whether substantial transformation has taken place in producing the final good. This will therefore enable such goods to be considered ‘New Zealand originating’. This approach is based on the World Customs Organisation’s harmonised system of tariff codes and is widely used throughout the world. We see this as being useful. It will smooth out some of the bumps in our trade relationship more than have a dramatic impact.

As stated by our Minister for Trade at the time, along with his New Zealand counterpart, the last process of manufacture method will continue to be available alongside the new change in tariff classification method. This provision will be in effect until December 2011, allowing traders and manufacturers time to come to terms with and adapt to the changes. It is an entirely sensible arrangement.

One of the key ministers we saw had suit manufacturers in his electorate, which I think focused his mind particularly on this issue. I am glad we resolved it. I am glad the relationship with New Zealand remains strong and firm. May we long beat them in cricket and in rugby, but let us get our economic union in working order so that the arrangements of the past no longer bog us down in unnecessary bureaucratic requirements. This will facilitate the strength of our combined economies, which is to the mutual benefit of Australia and New Zealand. I commend the bill to the House.

Duncan Kerr (Denison, Australian Labor Party) Share this | Link to this | Hansard source

I thank the honourable member for Cook for his kind remarks. I certainly enjoyed his company when we were in New York together at the United Nations, where I also learned of his appreciation of fine suits.

Nicola Roxon (Gellibrand, Australian Labor Party, Shadow Attorney-General) Share this | Link to this | Hansard source

Amidst all of this self-congratulation about suits I hate to rain on everybody’s parade, but there are actually some industries that, unfortunately, are not getting similar special treatment. Whilst I understand that there are historic reasons for some exceptions being in place and negotiated as part of this agreement, I am in the unfortunate position where a company in my electorate will be severely affected by the changes that will be brought about as part of the Customs Legislation Amendment (New Zealand Rules of Origin) Bill 2006.

Other members in the House have already spoken on the broader context of the agreement, and I do not want to detract from the general comments made about improving economic relations between our countries and removing the barriers that we can remove, but there is unfortunately sometimes a downside to these arrangements. The downside exists for a detergent producer in my electorate. The proposed change of arrangements from the regional value content method that exists now to the tariff classification method will mean that a substantial amount of trade between Australia and New Zealand will cease to exist and will be replaced by trade between China and New Zealand. The New Zealand company will still be able to provide their product into the Australian market, courtesy of these proposed new arrangements, with the same tariff treatment it would have received when part of its manufacturing process was being undertaken in Australia, with the final manufacture being done in New Zealand and the product coming back into Australia.

I will spend some time on the impact that the proposed arrangement will have on the business in my electorate and on the workers who will no doubt be affected by it. The arrangement will also have the bizarre result of reducing trade between Australia and New Zealand by the significant amount of $7 million, because the New Zealand company has already indicated that, as soon as these new rules are in place, it will obtain its product from China at a rate that the company in my electorate says indicates that it is being dumped. There is no way that an Australian company will be able to take any action, because it will not be dumped in Australia. It does mean that the New Zealand company will have a commercial advantage, but it will not really be a commercial advantage to either of our countries. It is not even a situation where, difficult as it may be for individual workers or members when it affects their electorates, the jobs are being moved from Australia to New Zealand.

The jobs impact is all negative in Australia, and it is not positive in New Zealand. Certainly the New Zealand company will be able to increase its profit line, but it made quite clear in the evidence provided to the Joint Standing Committee on Treaties that it was not making any undertakings about passing on any benefits to consumers as a result of this change, and it was not making any undertakings about extra employment in New Zealand. These things will be of little comfort to the workers in my electorate, but it may have been, in the overall picture of the relationship we are continuing to develop between Australia and New Zealand, something that others could at least have seen the sense of. It is very hard to make that argument when the consequence is that a New Zealand company will be able to buy product from China at a rate at which other companies cannot. If another competitor in Australia bought product from China at that rate, the company in my electorate would take antidumping action, as I understand they have either done or contemplated doing in the past.

So this unfortunate situation is made more unfortunate—and I know the discussion between the Deputy Speaker and the member for Cook, who was speaking just before, was good humoured—when you understand that exceptions are able to be made for particular industries. There are exceptions that exist for gentlemen’s apparel; why can’t there be an exception for this particular detergent product, when we know that both Australia and New Zealand participate in the production, where there are good relationships between the companies and where a very competitive market exists? There could not be any suggestion that laundry detergents and products are not a competitive sector of the retailing industry.

I am very concerned, so I have raised this issue. The affected company in my electorate is Albright and Wilson. They wrote to me when they first became aware of this proposed agreement. Disappointingly, they did not see the one advertisement that was in the Financial Review, I think, or the Australian. They were not contacted by the department or through their industry association. I understand that efforts are often made for that to happen and that the department cannot always get everybody, but I think this situation has shown an inadequacy in the process. The only reason the company became aware of it was that the New Zealand company that had the contractual arrangement with them to buy their product had a clause in their agreement that they should provide six months notice if they wanted to stop buying the product from the Australian company. So the New Zealand company, seeing that this agreement had been negotiated, and expecting that legislation would be moved within both parliaments, gave six months notice that they would cease purchasing the product from the company in my electorate. It was only at that time that Albright and Wilson became aware of this proposed change and the negative impact it will have on them.

Immediately we entered into discussion with the then Minister for Trade and the Minister for Industry, Tourism and Resources. We are obviously now dealing with the current Minister for Trade. Unfortunately, the responses from the government have all been interested and polite but not that it is prepared to take any action. Evidence to the committee and elsewhere seems to show that the government and the department are hiding behind the fact that the company was not aware at the earliest stage of this proposed change and therefore, by not being part of the negotiations, had missed its chance.

I do not accept that that is an adequate response when there is still plenty of time to add this proposed change to the agreement. It is a small change. I understand that the New Zealand government is implacably opposed to any change, as no doubt people always are when negotiations have been completed. But if our government had really shown any will or interest in picking this up on behalf of working Australians, I think the New Zealand government might well have considered the issue differently. I am disappointed that Minister Truss has written back basically saying: ‘We’ve taken it seriously, but we’re not going to do anything else. New Zealand is not prepared to reopen negotiations, and we won’t look at any sort of exception.’

The government also refers to an absence of industry consensus on this issue. I would say that it is more than an absence of industry consensus. It would be more accurate to say that the industry organisations have entirely conflicting responsibilities in this area. They have interests that can run completely counter to the interests of individual companies. Unfortunately, in this situation companies like Unilever Australia, with its relationship with Unilever in New Zealand, is a bigger organisation in the industry group than Albright and Wilson. The industry group is not prepared to make representations on behalf of one member when it might affect another member, even though Unilever New Zealand is an entirely discrete company.

It is very disappointing that the government was not prepared to take any action. There are 65 people in my electorate who are quite likely to lose their jobs as a result of the government’s failure to take any action on this issue. It could have been averted. I do not believe that the New Zealand government would be as reticent if the Australian government were prepared to seriously engage on this issue.

All members of the Joint Standing Committee on Treaties recommended—and the dissenting report made an even stronger recommendation—that this issue should have been dealt with, that it had slipped through the department’s consultation process for whatever reason and that negotiations on it should be entered into immediately. But that has not happened. Given that the government has been determined not to take on this issue, we will give it one last opportunity. In the consideration in detail stage of this debate, we will be moving an amendment which would provide for an exception for this line item.

We do not believe that there is any reason for the government not to support it. We will be calling on all members of the House who would be similarly concerned about working people in their electorates who were at risk of losing their jobs because of this action that has been taken to vote with us. If we do not get to the consideration in detail stage in the debate today, the government might reflect differently and be prepared to accept this change. Otherwise, should the loss of these jobs come to pass, it will be on their heads. It will show that there is generally no preparedness on behalf of the government to take account of the interests of the community.

I would like to indicate that we have taken as many steps as possible to support Australian industry, particularly the manufacturer Albright and Wilson and their staff who are situated in my electorate. We have pursued two different trade ministers on this issue. We have been in consultations with the industry minister. Labor members, through the treaties committee, tabled a dissenting report urging immediate negotiations on this issue. I would like to record my thanks to the member for Swan and a number of his colleagues on the treaties committee for pursuing this issue. But still the government has failed to take any action.

We will be asking for an exemption. It is not new to have an exemption in these sorts of agreements. It is not adequate to say that it will be dealt with later. The jobs at Albright and Wilson will be lost and people’s livelihoods will be ruined. The business may well go under completely. All that the government will have delivered through this legislation is the ability for a New Zealand company to buy dumped Chinese product instead of Australian product. That is all that will be achieved if the government votes against our proposed amendment. That is not a good outcome for closer economic relations between Australia and New Zealand. There is no possible excuse for the government to avoid an opportunity to support the maintenance of $7 million worth of trade between our two countries. I urge the government to reconsider what it is doing.

We cannot afford to lose this Australian industry. We know that manufacturing contributes not only to our export performance but also to our research and development. Albright and Wilson employ chemists, administrators and chemical workers. They have industry partnerships with research institutions that encourage product development and innovation. All of this is being put at risk because of the government’s stubborn determination not to take account of the interests of this company. The government has made exemptions in the past. It has made them for gentlemen’s apparel. There are other industries with similar exemptions. There should be one in place for this product, which is made in my electorate. I will be urging the government when we consider the bill in detail to accept my proposed amendment so that this agreement will be able to go ahead with the support of members not just on the government’s side of the House but on our side as well.

Philip Ruddock (Berowra, Liberal Party, Attorney-General) Share this | Link to this | Hansard source

in reply—May I firstly thank the members who have contributed in this debate tonight. I notice the list is somewhat shorter than I originally anticipated, but I thank the members for Griffith, Gellibrand and Cook for their contributions. I note that they have participated in the debate on the proposed amendments to the Australia-New Zealand Closer Economic Relations Trade Agreement which will allow for a change of tariff classification method to be used along with a regional value content requirement in determining whether goods meet the rules of origin for the CER.

Together with the current last process of manufacture method, importers on both sides of the Tasman will have the option of using either method until 31 December 2011, when the current method will cease to operate. The amendments will simplify the process of determining whether a good from New Zealand is a New Zealand originating good. The current last process of manufacture method can be administratively burdensome for a manufacturer and can lead to uncertainty because of exchange rates, for example.

The proposed amendments will bring greater certainty and be administratively simpler. They will improve efficiency by allowing greater use of imports not produced in Australia or New Zealand, without adverse impact on the ability to claim origin. They are consistent with the international trend to use the CTC approach.

I commend the amendments in cementing even further the strong economic and trade relationship between Australia and New Zealand. It has grown significantly since the entry into force of the CER in 1983. I notice that the member for Gellibrand is proposing an amendment to the regional value content provision, which will require goods classified to be subject to a 50 per cent regional value content in the rules of origin regulation.

Goods classified in 3402.20 are subject to a rule already agreed to by Australia and New Zealand. This rule was discussed and agreed by the industry concerned. Our view is that an amendment along the lines that the member proposes would need negotiations to be reopened with New Zealand, which has indicated that it is not prepared to discuss amendments to annex C of the CER.

The other matter raised was the dumping of goods classified under 3402.20 through New Zealand. The Australian legislation provides that a third-party anti-dumping application can be made. This legislation is consistent with the WTO requirements and, to date, we are not aware of any such action being commenced. I make those observations in relation to the proposed amendment. Obviously, when it is moved, we will be opposing it.

Question agreed to.

Bill read a second time.