Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

The opposition will support the passage of the Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014, also known as the KAFTA tariff bill, and the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014, or the KAFTA rules of origin bill. I also foreshadow that at the end of my contribution I will be moving some amendments that have been circulated in my name.

Trade reform has been one of the most significant reforms of the modern era. It has contributed to today's dynamic and competitive Australian economy; it has improved the living standards of millions of Australians; it has stimulated the growth of innovative and entrepreneurial Australian businesses; and it has created jobs. It is one of my firmest beliefs that trade, when done right, can be a powerful engine for economic and cultural advancement. There are massive benefits to freer trade when it is done right.

The McKinsey report Global flows in a digital ageshowed that the flow of goods, services and finance internationally reached $26 trillion in 2012, or 36 per cent of global GDP, which is 1½ times the level in 1990. Today, one in three goods crosses national borders, and more than one third of financial investments are international transactions. Last year, two-way trade in Australia reached an all-time high of $628 billion, with the Department of Foreign Affairs and Trade estimating that one in five Australian jobs are directly linked to trade. So trade is integral to the future prosperity of Australians and to their economy.

In government, Labor pursued trade liberalisation for four decades, from the Whitlam government's across-the-board tariff cut to the Hawke and Keating governments' dismantling of protectionist barriers to the Rudd and Gillard governments' pursuit of trade agreements. We inherit from our predecessors on the Labor side a proud legacy of achievement when it comes to trade liberalisation, whether it is John Dawkins, who founded the Cairns group of agricultural exporting nations; the great, late Peter Cook, who helped conclude negotiations for the GATT Uruguay Round; Simon Crean, a friend of this place and of many people in this chamber, who negotiated free trade agreements with Chile, ASEAN and New Zealand; or Craig Emerson, my predecessor in Rankin, who signed major trade agreements with Malaysia and made progress on ambitious new pathways to progress the WTO's Doha Round.

Consistently, Labor has championed freer trade because it is consistent with Labor principles. When it is done right, working Australians can be better off. They can access cheaper consumer goods and they have greater access to the global marketplace. Greater investment in Australia means more activity and more jobs, and trade develops stronger cultural and economic ties, and that means a more dynamic and a more resilient economy. In opposition, Labor, I am proud to say, maintains its support for trade liberalisation.

The ideal when it comes to trade liberalisation is multilateral deals—multilateral deals that address tariff and non-tariff barriers as well as all the other components of the modern global market economy. It is true, unfortunately, that multilateral momentum has stalled in recent years. Apart from some good achievements that began with Craig Emerson and others, it is the case that the world has slowed its momentum towards multilateral agreements. That is a great shame, because the gold standard when it comes to freer trade is agreements that contain more countries rather than fewer.

We should note that among the other negotiations that are happening right now around the world there are plurilateral trade deals as well—the TPP and others—where there is more than a bilateral arrangement in play, but they still fall short of that gold standard of multilateral deals that we want to see in the world. But we can see bilateral FTAs, like the one with Korea that we are discussing today, as stepping stones. I quote my colleague Penny Wong, who said in a speech in July:

… even if we are in the second best political world of preferential negotiations, we should seek to ensure these are used as stepping stones to multilateral agreements.

That is why Australia has seven of these types of trade agreements in place, eight under negotiation and two signed but not yet in force.

In trade, as in business, not every deal is a good deal, which means that Labor are committed to closely scrutinising the outcome of all the Abbott government's trade negotiations. When we do that, we cast a critical eye over the agreements. It is not about free trade agreements for their own sake. We look at them on a case-by-case basis. We want to give peak industry groups and other concerned actors in our economy the chance to have their say. At the end of all of that, we need to make an on-balance judgement in the national interest. As policymakers we do have the responsibility to be hard-headed and to seek an agreement which is, on balance, in the best interests of Australians, whether that be Australian businesses, Australian workers or both.

While Labor initiated negotiations on the Korea-Australia Free Trade Agreement and made really substantial progress in those negotiations during the Gillard and Rudd governments, agreement was not reached until after the 2013 election and the change of government. Labor MPs and senators have closely examined the agreement in the course of inquiries by the Joint Standing Committee on Treaties and the Senate Foreign Affairs, Defence and Trade References Committee. I do want to take the opportunity to thank the members of those committees, one which has reported and one which I understand is about to. I want to thank them for the way they went about their task. People on all sides of politics did their best to get to the bottom of some of the issues that were concerning those who came and gave evidence. I also want to thank those groups who took the time to do that, because our understanding of this deal was greatly enhanced by the effort that people put into those submissions, by the meetings that we had and by the discussions that we had. In particular, I want to thank those who came to see me about this Korea-Australia free trade negotiation because my own understanding of some of these issues was improved by their willingness to spend time with so many of us on both sides of the House, whether in the formal committee process or outside the formal committee process.

Like many of the people who came to see us and like a number of people in some of the key sectors including agriculture, we were disappointed by some aspects of the deal that the government has delivered. Notwithstanding that disappointment, as I said before, we do believe that, on balance, the Korea -Australia Free Trade Agreement is in the national interest. For that reason, in addition to supporting the enabling legislation before the chamber, Labor supports binding treaty action that will bring the agreement into force.

Before I examine some of the concerns that we do have about the agreement, let me outline some of the reasons that we on the Labor side believe that the agreement will be, on balance, beneficial. As members would be aware, the Republic of Korea is Australia's third largest export market, our fourth largest trading partner and a growing investment partner. In agriculture, resources and services, Korea is already a significant market for our world-class exporters. Our two-way trade was valued at $30.5 billion in the last financial year alone. Under the Korea-Australia Free Trade Agreement, tariffs will be reduced to zero on 84 per cent of exports from Australia to Korea immediately, rising to 95.7 per cent of Australian exports in 10 years time. The agreement is forecast to boost Australia's exports to Korea by $3½ billion by 2030, to boost Australia's beef exports to Korea by 59 per cent by 2030, to boost Australia's GDP by $650 million by 2030 and to create an additional 1,745 jobs in Australia in 2015.

In agriculture, this agreement covers the beef, sugar, dairy, wheat, wine and horticulture sectors. These sectors combined employ something like 200,000 workers. Another 150,000 Australians are employed in the related red meat supply chain, manufacturing, processing and transport industries. Many of these Australians live and work in rural and regional Australia or on the fringes of our major cities. They pay taxes, they send their kids to local schools, they run local footy clubs and they volunteer in local fire brigades, and we have a responsibility to look after them. These Australians, as well the businesses that employ them and the communities they sustain, deserve the opportunities that trade agreements can deliver through increased market access. Other manufacturers will also benefit.

I want to give one example to the House. Blackmores is one of Australia's leading natural healthcare companies. They will benefit from increased market access to grow their exports. This Australian company employs approximately 800 staff, most of whom are based here in Australia. It manufactures vitamins and other products in this country predominately from Australian ingredients. A Blackmores representative informed the Senate inquiry into this agreement that it would directly benefit from an 8 per cent tariff cut on its products exported to Korea. This tariff cut will have a direct impact on Blackmores' selling price, which should then deliver an increased market share, giving the company the capacity to reinvest in its business to fund further expansion, which means more jobs. Blackmores believes that the Korea-Australia Free Trade Agreement will translate into at least 10 per cent, and possibly 20 per cent, annual growth for the company in Korea. As a leading brand, this growth will lead the way for other Australian exporters into the Korean market.

In the services sector, Australian law firms will soon establish joint ventures in Korea and hire local lawyers. Australian accountants will soon be able to work in and invest in Korean accounting firms. Australian financial services providers will be able to supply certain financial services and a range of insurance and insurance-related services. The Korea-Australia Free Trade Agreement is just one stepping stone to trade liberalisation and more prosperity for Australia in the Asian century and beyond. It is not perfect, but on balance it is a positive step. It will not just facilitate economic exchange, it will also promote cultural exchange, enriching both our nations in the process.

But like a number of other people who have studied this issue, and like a lot of the stakeholder groups that spoke to the formal committees or to members of parliament individually, we do have our concerns about aspects of this deal. That is why I will be moving an amendment at the end of my contribution to put some words around some of those concerns. But let me try and explain them first. The first is around what is known as an investor-state dispute settlement provision. It is commonly referred to as an ISDS. Labor does not support the inclusion of ISDS provisions in trade agreements. Labor does not support provisions that confer greater rights on foreign businesses than on domestic businesses or provisions that constrain the ability of the government to make laws on social, environmental and economic matters, and Labor will not ask this of its trading partners in future agreements that we take part in.

The Australia-United States Free Trade Agreement, negotiated by Prime Minister Howard and his government, did not include an investor-state dispute settlement provision. Having determined in 2011 that Labor governments would not include such provisions in future trade agreements, Labor successfully negotiated our free trade agreement with Malaysia without an ISDS provision. The Korea-Australia Free Trade Agreement, finalised by this government, does, unfortunately, include one of these ISDS provisions. It says something about the nature of these provisions that the government felt the need to negotiate some related safeguards, and I will talk about those in a moment, but let me make it clear that Labor does not support the inclusion of an ISDS provision in this or any future agreement. But what we cannot do today or in the consideration of this legislation is vote down an ISDS provision. There is no such provision in the bills before us. And should these bills be defeated, the treaty will not then enter into force.

During the course of two parliamentary inquiries, informed by the written and verbal submissions of many concerned Australians, Labor has examined the impact of the ISDS included in the text of the agreement finalised by the government, as you would expect. In broad terms, the agreement carves out from its investment and ISDS provisions measures to protect human health and the environment and existing measures and space to adopt new measures in sensitive areas, including security, human health and creative arts. The agreement also provides that non-discriminatory actions to protect legitimate public welfare objectives do not constitute expropriation. The Department of Foreign Affairs and Trade has advised that these are the most comprehensive carve outs of any trade or investment agreement to which Australia is a party which includes ISDS provisions. Members of this place will be aware that Australia is currently defending an ISDS claim relating to world-leading tobacco plain packaging legislation introduced proudly by the former Labor government. This is the only such claim involving the government of Australia. It has been made by Philip Morris Asia under a 1993 bilateral investment treaty with Hong Kong. The Department of Foreign Affairs and Trade has advised that safeguards in the Korea-Australia Free Trade Agreement would prevent a similar challenge by a Korean entity to tobacco plain packaging or similar legislation.

Labor's decision to support these bills and the agreement itself should not be misunderstood as extending support to these ISDS provisions. What we have to weigh up is the cost to workers, exporters and our economy if the parliament does not pass the necessary enabling legislation before us. In blunt terms, a no to the Korea-Australia Free Trade Agreement would cement decades of competitive disadvantage for Australia. Modelling from ABARES shows that without this agreement Australia's share of the Korean beef market would fall to 28 per cent by 2029, with one of our key competitors, the United States, the key beneficiary. But with the agreement in force, our share of the Korean beef market is forecast to rise to 43 per cent. That increase in market share means more national income. It also means, of course, more jobs in that industry. The negotiation of treaties is reserved for executive government. Governments are ultimately accountable to the people through the ballot box for their exercise of executive power. So, today Labor urges the Abbott government to rethink its decision to include an ISDS provision in the Korea-Australia Free Trade Agreement and renegotiate the agreement to excise this provision before it enters into force. Should that not happen, a future Shorten Labor government would seek to negotiate with Korea for the ISDS provisions to be removed from the agreement.

In 2010, long before the conclusion of negotiations on the Korea-Australia Free Trade Agreement, the Productivity Commission recommended that:

… any IP provisions that are proposed for a particular agreement should only be included after an economic assessment of the impacts, including on consumers, in Australia and partner countries.

Unfortunately, the government has not followed this sound advice. Accordingly, Labor is concerned about the inclusion of intellectual property provisions in the Korea-Australia Free Trade Agreement. We share these concerns with academic and industry submitters to the two parliamentary inquiries into the agreement. And I want to take a moment to pay tribute to the work of the member for Gellibrand, a fellow class of 2013 new member on this side of the House who has genuine longstanding knowledge and interest in this area and who has played a substantial role in helping us understand some of the complexities of this part of the agreement.

The national interest analysis tabled by the government in relation to the Korea-Australia Free Trade Agreement says this about this issue:

Consistent with Australia's existing obligations in the Australia-US and Australia-Singapore FTAs, and to fully implement its obligations under KAFTA, the Copyright Act 1968 will require amendment in due course to provide a legal incentive for online service providers to cooperate with copyright owners in preventing infringement due to the High Court's decision in Roadshow Films Pty Ltd v iiNet Ltd, which found that ISPs are not liable for authorising the infringements of subscribers.

The so-called 'requirement' was questioned by witnesses before both parliamentary inquiries, and even the Attorney-General's Department described it as more of a 'risk assessment'. The government is yet to clarify this matter and has not made available exposure draft legislation or presented legislation amending the Copyright Act to the parliament. Labor urges the minister to clarify the government's position when he sums up the second reading debate. And I can confirm that Labor reserves its right to determine its position on any proposed changes to the Copyright Act, once published or introduced to the parliament, based on their policy merit or otherwise.

Labor believes that Australians should have the opportunity to fill job vacancies where they have the capacity to do the job that is required. We are concerned therefore about the government's decision to deny itself the capacity to impose labour market testing on contractual service providers from Korea under the 457 visa program. Section 457 visas allow foreign residents to work temporarily in Australia. In most cases there is a requirement for labour market testing to demonstrate local skills shortages. Many existing free trade agreements provide for movement-of-people arrangements for categories of skilled workers, including executives and senior managers, specialists as intra-corporate transferees, independent contractors, and contractual services providers. I note that in both the ASEAN-New Zealand and Malaysia Free Trade Agreements negotiated by Labor policy space was reserved for labour market testing on contractual service providers.

The government's national interest analysis on the Korea-Australia Free Trade Agreement says:

As this chapter locks in existing arrangements, no significant change is expected in the number of skilled workers entering Australia.

During a hearing of the Senate Foreign Affairs, Defence and Trade References Committee, senior representatives from the Department of Immigration and Border Protection advised that they did not believe there would be any significant additional movement of people based on the provisions in the Korea agreement. Currently the number of Korean nationals in Australia on 457 visas is 2495 primary holders and 2575 secondary holders, and numbers of that scale do not have a significant impact on local jobs. Indeed, if some of those holders are here for business investment purposes, the impact on local jobs could even be positive.

Labor notes the assurances provided by the national interest analysis and testimony from senior officials, and we will hold the government to account on this point. We also urge the government to put in place measures to more accurately track visa entrants based on free trade agreement provisions, including exemptions from labour market testing requirements. Labor also urges the government to take seriously concerns about the non-enforceable nature of the labour standards incorporated in the agreement. I invite the minister to outline to the House how concerns about labour standards in Korea will be addressed in the framework of the agreement finalised by his government.

Recognising the inclusion of tariff reductions in the agreement—and the legislation before us—Labor urges the government to reverse its cuts to automotive industry programs and work with employers and unions to ensure Australia has a sustainable automotive components sector. Having goaded Holden to abandon manufacturing in Australia, the Abbott Government does have a particular obligation to ensure our world-class auto component industry—and the jobs and skills it sustains—does not similarly exit our shores.

Labor shares industry concern about disharmony in the application of rules of origin and the requirements around a certificate of origin versus a declaration of origin. There is serious concern from ACCI, among others, that the provisions in the Korea-Australia Free Trade Agreement will increase, and not diminish, red tape for business. Labor urges the government to listen to business to ensure the potential of the Korea-Australia Free Trade Agreement is fully realised. Should the fears of business come to pass, Labor encourages the government to act quickly through established processes under the agreement to sort out the mess and make market access in Korea a reality for Australian exporters—small, medium and large.

As I have already said, Labor supports the bills before the House. We do support the Korea-Australia Free Trade Agreement. For reasons I have just outlined, though, this support is not without reservation. There is a broader point at play as well about globalisation. When we are talking about freer trade and trade liberalisation, it is not just a matter of giving Australian businesses access to opportunities and creating jobs—as important as all of that is—but we do have to contemplate as a parliament, if we care about the future of this country, how we are going to teach and train our people to occupy the best parts of the global value chains in the international trading system that will increasingly characterise the future of this country and the dynamic region we find ourselves in and the global economy as a whole. When we talk about these very specific negotiations and deals, we should also think about what it means for our people—whether we can demonstrate to them the benefits, not only of jobs but opportunities of all kinds; whether we have the right higher-education system to set people up to occupy the best parts of these global value chains into the future. That is how we will make globalisation work for us, and not against us. My personal view is that we cannot be defensive when it comes to some of these sorts of agreements. We do need to think that we are good enough, confident enough, competitive enough and smart enough to grasp the opportunities of the Asian century to make sure that we do not instinctively and reflexively curl ourselves up into a ball and hope that the world does not notice us. There are tremendous opportunities in freer trade. This deal itself is, on balance, a good deal for Australia. It is not without its limitations, and I have run through those today, but, on balance, it is a good deal for Australia and it should be a stepping stone to more ambitious trade agreements—not just bilateral ones, but plurilateral and ideally multilateral—so that Australians get the best access to the best opportunities in the best region of the world. KAFTA a small step towards this, but a step towards it is nonetheless.

We do therefore support this legislation, but we must acknowledge Labor's reservations and community reservations with the final agreement. In that context, I want to conclude my contribution by moving the following motion, which has been seconded by the member for Isaacs:

That all words after "That" be omitted with a view to substituting the following words: "whilst not declining to give the bill a second reading the House urges the Government to:

(1) seek to re-negotiate the Korea-Australia Free Trade Agreement to omit provisions relating to Investor State Dispute Settlement;

(2) provide clarity on proposed changes to copyright and assurance that any proposed changes as a result of the Korea-Australia Free Trade Agreement do not create adverse impacts for intellectual property owners or users;

(3) protect Australia's right to regulate labour market entry and promote labour standards;

(4) reverse its cuts to automotive industry programs and work with employers and unions to ensure Australia has a sustainable automotive components sector; and

(5) address business concerns about complex rules of origin in the Korea-Australia Free Trade Agreement and lack of harmonisation with other preferential trade agreements."

I thank the House.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Shayne Neumann (Blair, Australian Labor Party, Shadow Minister for Indigenous Affairs) Share this | Link to this | Hansard source

Deputy Speaker, I second the motion and reserve my right to speak.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time, to which the member for Rankin has moved an amendment. The question now is: that the amendment be agreed to.

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

Mr Deputy Speaker, I declare that the following bills be referred to the Federation Chamber for further consideration: the Customs Amendment (Korea Australia Free Trade Agreement Implementation) Bill 2014 and the Customs Tariff Amendment (Korea Australia Free Trade Agreement Implementation) Bill 2014.