Wyatt Roy (Longman, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Joint Standing Committee on Treaties I present the committee's report 142, incorporating dissenting reports, entitled Treaty tabled on 13 May 2014.

Report made a parliamentary paper in accordance with standing order 39(e).

by leave—Today I present the Joint Standing Committee on Treaties report 142, containing the committee's views on the Free Trade Agreement between the Government of Australia and the Government of the Republic of Korea. The Korea-Australia Free Trade Agreement, or KAFTA, was tabled in parliament on Tuesday 13 May 2014.

Free trade agreements are becoming increasingly popular as a means of encouraging trade liberalisation, opening up market access and strengthening bilateral relationships. This is the eighth free trade agreement that Australia has signed.

Korea is one of Australia's most important trading partners: our third-largest export market, our fourth-largest trading partner and a growing investment partner. Currently, Australia faces various tariff and non-tariff barriers and restrictions in Korea. Korea's average tariff on imports is 16.8 per cent, with an average tariff on agricultural goods of 53.6 per cent and tariff peaks of over 500 per cent.

KAFTA will eliminate these very high tariffs on a wide range of Australian goods exports, including beef, wheat, sugar, dairy, wine, horticulture and seafood. It will also create new market openings in key areas of commercial interest to Australian services providers, including legal, accounting, financial, education and other professional services.

KAFTA is expected to be worth $5 billion in additional income to Australia between 2015 and 2030. It is expected to provide an annual boost to the Australian economy of approximately $650 million after 15 years of operation. In its first year of operation, KAFTA is expected to create 1,700 jobs. Eighty-four per cent of Australia's current exports, by value, will enter Korea duty free. Agricultural exports are expected to increase by 73 per cent and manufacturing by 53 per cent by 2030 as a result of the agreement.

The committee found that a range of benefits are likely to flow from the implementation of KAFTA for Australian businesses, industry and exporters. Apart from the direct value of tariff reductions, increased competitive advantage and potential future opportunities were identified as tangible positive results. Witnesses emphasised the importance of the agreement in protecting our competitive edge in the Korean market as Korea signs free trade agreements with our major competitors, including the United States, European Union, Chile and ASEAN countries.

We identified and examined a number of issues that are causing concern amongst the wider community. In particular, the perceived dangers associated with the inclusion of an investor-state dispute settlement mechanism in the agreement and possible changes to intellectual property rights. More generally, some dissatisfaction with the treaty-making process in Australia was drawn to our attention. However we recognise the constitutional constraints on the process in Australia and we highlight the improvements that have been made over the last two decades.

Overall, the committee is satisfied that KAFTA will provide substantial economic benefit, not only to Australian business and industry, but also to the broader community.

I might take this opportunity to thank the hard work of the negotiating team, predominantly in DFAT, but across the public service. I also thank my fellow committee members, who undertook a very large body of work in formulating this report on what is a very significant agreement for our country. And I also thank the committee secretariat team, some of whom are here in the chamber today, who joined us on that journey and who put together what is, again, an enormous body of work on a very important agreement.

On behalf of the committee, I commend the report to the House.

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

by leave—I thank the chair for his kind remarks and endorse his comments about the work of the secretariat concerning this treaty agreement.

There is no doubt that globalisation has changed the face of the world. But has it changed the world for the better? This is much less clear. A report earlier this year by Oxfam found that the richest 85 people in the world own as much wealth as the bottom half of the world's population, some $3½ billion dollars combined. Half the world's wealth is owned by just one per cent of the world's population and the situation is getting worse. In nearly every country they surveyed, economic inequality has increased since 1980. The richest one per cent in the US more than doubled their share of national income; in Australia, the richest one per cent doubled their share and after the GFC the wealthiest one per cent in the US captured 95 per cent of post crisis growth whilst the bottom 90 per cent became poorer.

I think that the globalisation cheer squad, who claim that the world is getting better, also have some explaining to do about the dreadful and deteriorating security situation we now see in Ukraine, Iraq, Syria, Gaza and beyond. As Tim Costello has pointed out, with the globalisation we now have global problems: global terrorism, global warming, global financial crises and global diseases. So when it comes to bilateral trade agreements like this one, I support Labor policy. I do not support the inclusion of investor-state dispute settlement provisions in bilateral trade agreements.

I am aware that in the past there have been treaties negotiated which include such provisions. But the litigation launched by Philip Morris to sue the taxpayers of Australia over the introduction of plain packaging on cigarette packets, using our trade agreement with Hong Kong as a device, was a wake-up call to all of us about the dangers inherent in these provisions.

The Labor Party had regard to this wake-up call. Labor's national platform expressly states that Labor does not support the inclusion of provisions in trade agreements that confer greater legal rights on foreign businesses than those available to domestic businesses. It goes on to say, 'Labor does not support the inclusion of provisions that would constrain the ability of the government to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses.' But that is exactly what the investor state dispute settlement provision in this agreement will do.

Craig Emerson, no starry-eyed crusader for international socialism, during his time as trade minister, refused to negotiate any bilateral agreements which included such a provision.

ISDS provisions elevate the interests of corporations above those of the public and their democratically elected governments. They are fundamentally undemocratic.

The government says the investor state dispute mechanism contains safeguards. But there is no guarantee that the safeguards are adequate. We are agreeing to submit government actions to ISDS arbitration panels. These panels are made up of investment law experts, who have a past and a future in representing investor complainants. ISDS panellists can be an advocate one month and an arbitrator the next. Unlike permanently employed, independent judges, arbitrators are paid by the hour, creating an incentive for cases to drag on. Most cases take from three to five years to resolve.

ISDS has no system of precedents or appeals. One arbitrator from Spain, Juan Fernand Armesto, has observed, 'When I wake up at night and think about arbitration, it never ceases to amaze me that sovereign states have agreed to investment arbitration at all. Three private individuals are entrusted with the power to review, without any restrictions or appeal procedure, all actions of the government, all decisions of the courts and all laws and regulations emanating from the parliament.' The more you think about it, the more amazing it is.

The Treaties Committee was informed that as of April this year, there were 568 known ISDS cases brought under treaties—274 cases have been concluded, approximately 43 per cent were decided in favour of the state, 31 per cent were decided in favour of the investor and approximately 26 per cent of cases were settled. There is every chance these cases involved taxpayers handing over money to corporations. Nearly 300 cases remain unresolved.

We do not need, and are crazy to have, this handbrake on government. After the Productivity Commission recommended in 2010 that Australian governments should seek to avoid ISDS provisions in treaties, we did that. It did not stop us negotiating a trade agreement with Malaysia. The Liberal government has been able to enter into a trade agreement with Japan without agreeing to an ISDS. The government was wrong to let one in through the door here and this agreement should go back to the drawing board and be renegotiated to remove its ISDS clause.

Wyatt Roy (Longman, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

In accordance with standing order 39(c), the debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.