Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Joint Standing Committee on Treaties I present the committee's report entitled Report 118: Treaties tabled on 23 March and 11 May 2011, incorporating a dissenting report and additional comments. I ask leave of the House to make a short statement in connection with the report.

Leave granted.

I thank the House. Report 118 contains the committee's views on two treaties: the Protocol on Investment to the Australia-New Zealand Closer Economic Relations Trade Agreement and the Resolution MPEC.189(60) Amendments to the Annex of the Protocol of 1978 Relating to the International Convention for the Prevention of Pollution from Ships, 1973 (MARPOL).

Australia's economic relationship with New Zealand is conducted within the framework of the Australia-New Zealand Closer Economic Relations Trade Agreement, colloquially known as ANZCERTA. It covers all trans-Tasman trade in goods and services and is the principal instrument for the elimination of trade barriers between the two nations. The protocol on investment will raise the threshold below which New Zealand investors in Australia require investigation by the Foreign Investment Review Board from a 15 per cent or more share of an Australian entity worth at least $231 million to an investment of $1.005 billion. For Australian investors in New Zealand, the threshold below which they will not be subject to investigation has increased from NZ$100 million to NZ$477 million. Both countries have retained the entitlement to review foreign investment originating in the other signatory and sensitive areas, such as urban residential and commercial property investment; media, telecommunications, transport; defence related industries; uranium investments in Australia; and farming, waterfront or sensitive land investment in New Zealand.

The Department of Foreign Affairs and Trade says that the protocol on investment is in the national interest because it will remove or reduce investment barriers; bring the treatment of New Zealand investors under Australia's foreign investment regime, in line with that granted to United States investors under the Australia-United States Free Trade Agreement; and maintain Australia's capacity to screen New Zealand investment proposals that are large or involve sensitive sectors that raise national interest concerns.

While the majority of the committee supported ratification of the protocol on investment, the report contains a dissent in relation to this treaty. The dissenting report from the members for Murray and Mallee is thoughtful, and I hope the government gives it proper consideration in thinking about future foreign investment policy. The truth is that many Australians are concerned about foreign investment, and the evidence to the committee about the Foreign Investment Review Board's handling of foreign investment does not do much to allay those concerns. In 10 years, the FIRB has knocked back just two foreign investment proposals: the Shell bid for Woodside and the Singapore stock exchange bid for the Australian Stock Exchange. The FIRB says that it will reject proposals that are not in the national interest. But, when you ask Treasury whether foreign investment is in the national interest, you are told that it is. If you ask, 'Are there any circumstances in which it might not be in the national interest?' all you get is a shrug of the shoulders. The second treaty considered in this report is the Resolution MEPC 189(60) amendments to MARPOL. This treaty is a multilateral treaty regulating marine pollution. The amendments add a new chapter 9 to MARPOL dealing with the use and transport of heavy fuel oil in Antarctic seas. The new chapter will prohibit the bulk transportation and use as fuel of heavy oils, bitumen and tar and their emulsions unless they are aboard vessels securing the safety of ships or in a search and rescue operation, and ships owned and operated by governments such as naval vessels, auxiliaries and research vessels.

The Australian Antarctic Division administers the Australian Antarctic Territory and is the major Australian presence in the Antarctic. The division strongly supports the measures introduced under the resolution. Nevertheless, implementation of the resolution will have some operational and budgetary implications for its work. Given Australia's leadership in marine environment protection, it is worth noting that the research vessel chartered by the division, the RSV Aurora Australis, already uses light fuel and is therefore compliant with the treaty. Australia's stations in the Antarctic are also compliant.

The division also contracts Russian flagged vessels to provide logistic support for its Australian Arctic program. These vessels are large, specialised, ice-strengthened cargo vessels, which, unfortunately, operate on intermediate fuel oil which will be banned under the treaty. However, the division has advised the committee that the fleet of ice-strengthened cargo vessels is nearing 30 years old, which is the usual end of a ship's life. The division expects to see a changeover in this fleet to modern, compliant vessels in the next five years.

The committee is concerned that a large proportion of vessels operating in Antarctic waters will be exempt from the prohibition on the basis that they are operated by governments. We believe the Australian Maritime Safety Authority should monitor the number of exempt ships carrying heavy oils in the region to see whether the provisions of the exemption need tightening. I commend the report to the House.

Sharman Stone (Murray, Liberal Party) Share this | Link to this | Hansard source

by leave—I thank our very able chairman, the member for Wills, for his reference to this dissenting report that I and the member for Forrest have attached to the Protocol on Investment in the Australian-New Zealand Closer Economic Relations Trade Agreement—ANZCERTA. This treaty was originally tabled on 11 May 2011. We are not, and certainly I am not, against the business of foreign investment in Australia—not at all. What we are concerned about is anything which further diminishes the transparency or scrutiny of any foreign investment proposal, and we are certainly concerned when this is done, as it appears to be, as a cost-cutting measure.

This protocol does not in fact harmonise current anomalies or increase scrutiny of investment proposals by foreign private parties between Australia and New Zealand. As I said, it diminishes scrutiny and increases the disparities which already exist between the investment potentials in Australia and New Zealand for private companies and citizens. While it presumes to be doing more, the new ANZCERTA investment protocol only focuses on significantly increasing the dollar thresholds that trigger screening in either country. The actual business of this protocol is to make sure that New Zealand enjoys the same treatment as our preferred trading partner, the United States of America, when it comes to investment protocols. With this protocol, New Zealand investors would see the threshold for the scrutiny of their proposals raised from 15 per cent of A$231 million for general investment, A$5 million for Australian heritage properties or A$50 million for commercial properties to the one all-encompassing trigger of 15 per cent of A$1.005 billion in assets for any investment by a New Zealand corporation or business.

Australians, on the other hand, would see the investment-screening threshold raised from 25 per cent of New Zealand's NZ$100 million to 25 per cent of NZ$477 million. The New Zealand Overseas Investment Office would retain its current 'sensitive assets' criteria, so in effect this protocol does not at all give a level playing field to the two countries' investment. The argument for that is that New Zealand has a much smaller economy and investment by Australians in New Zealand is, at this point in time, substantially greater than the reverse.

I have to say, however, that the protocol does not address different percentages of investment triggering scrutiny or the levels of proposed investment triggering screening. Neither does it deal with the different definitions of so called 'sensitive assets' in New Zealand, which include rural land over five hectares and any waterfront property, or Australia's prescribed 'sensitive areas', which include media, telecommunications, transport, defence related industries and uranium but not rural land or waterfront land. Those disparities would continue under this new so-called 'harmonising protocol'. As well, New Zealand citizen investors are given a special visa category which exempts them from Australia's residential property investment conditions. However, the same does not occur for Australian citizen investors in New Zealand. They will continue to be restricted by certain criteria, for example, in regard to water frontage and farmland over five hectares.

The New Zealand OIO also charges a significant application fee of some NZ$12,000. Australia does not charge anything at all. This is another anomaly which has not been considered. New Zealand Treasury has calculated the protocol as proposed would substantially reduce the current costs for investment in business assets by around two-thirds. But it would appear that this will largely come from Australian businesses less frequently triggering the New Zealand OIO application fees, and fewer New Zealand investors triggering the Australian thresholds. Therefore, this saving comes at a cost of less scrutiny and transparency for either country. It cannot be seen as a savings carrying a benefit of increased efficiency or effectiveness or ensuring the national interests of both countries are preserved. Australia accepted the conditions of the Australia-United States Free Trade Agreement for screening of non-government investment in Australia by US corporations or businesses. This is now the standard to be offered to New Zealand as the equivalent of USA preferred status. However, that Australia-United States Free Trade Agreement hardly had generous conditions for Australia and it was not reciprocated nor harmonised with the United States criteria. The USA, for example, has no formal dollar threshold triggering screening of private investment but instead requires voluntary notification of any proposed investment which may trigger national security sensitivities.

It seems we still have not learned much then about equal or reciprocal bilateral trade arrangements or increasing transparency and accountability. In particular, article 8, the senior management and board of directors section of the new protocol, provides that neither party may restrict the nationality or residence of the senior management or board members of an enterprise of that party who plans to invest. We are concerned that such an arrangement could lead to a diminishing of Australia's national interest if board members or senior management are not resident in either country and do not have Australian or New Zealand nationality but still get to enjoy the preferential investment-screening treatment.

In summary, the only new obligation imposed by this new protocol on investment to the Australia-New Zealand Closer Economic Relations Trade Agreement is the requirement that Australia substantially increases the thresholds before screening of New Zealand private sector investment proposals occurs. Fees charged are not harmonised and special considerations are not aligned. Given the growing public disquiet about the lack of transparency and accounting for foreign investment in Australia, especially for farming land and manufacturing, now is not the time to simply raise the bar to save costs by triggering less scrutiny, assessment of national interest and accountability. In fact, I believe we need to urgently review our non-government foreign investment triggers for scrutiny and our definition of 'national interest', in particular to include consideration of Australian food production capacity. Because of those points, we cannot support this protocol.