Tony Pasin (Barker, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014.

I welcome this agreement with our friends in South Korea, because I believe that free trade is a force for good not only in my electorate of Barker but for the nation. Total Australian investment in Korea in 2012 was valued at $10.4 billion with Korean investment in Australia valued at $12 billion. The Abbott coalition government's swift conclusion of historic agreements with Korea and Japan since then sends a strong signal that Australia is open for business. With one in five Australian jobs linked to trade, these agreements are good for the economy, good for growth and good for job creation. The Korea-Australia Free Trade Agreement, or KAFTA, as it has been referred to, was signed on the 8 April in Seoul for the Minister for Trade and Investment, the Hon. Andrew Robb, and his Korean counterpart, Minister for Trade and Industry Energy, Minister Yoong Sang-jik.

The Korean gross domestic product is $1.22 trillion, with growth last year of 2.8 per cent. Korea has a population of over 50 million people and Australia's trade with Korea is already worth in excess of $32 billion. 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 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, with tariff peaks of over—could you believe it?—500 per cent.

This legislation amends the Customs Act 1901 to implement Australia's obligations under chapter 3 of the Korean-Australian free trade agreement. The agreement contains simplified trade facility of rules-of-origin and related documentary requirements. Goods imported into Australia that meet the rules of origin implemented through this bill will be entitled to claim preferential tariff treatment in accordance with the agreement. The Korea free trade agreement is a comprehensive agreement that substantially liberates trade with South Korea and creates significant new commercial opportunities for Australian businesses.

South Korea is Australia's fourth-largest trading partner and the implementation of this agreement will significantly boost Australia's position in this major market, where competitors like the United States, the European Union and the Association of Southeast Asian Nations are already benefitting from preferential access. KAFTA is expected to be worth $5 billion in additional income to Australia between 2015 and 2030, and to provide an annual boost to the Australian economy of approximately $650 million after 15 years in operation.

In its first year of operation it is expected to create 1,700 jobs and 84 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 this historic agreement.

The benefits to Barker of concluding a free trade agreement with South Korea are numerous and diverse and principally directed towards our agricultural and manufacturing sectors. Currently Australian exporters face high barriers, with Korea imposing an average tariff, as I have said, of 53.6 per cent on agricultural imports and prohibitive tariffs on some products of up to 550 per cent. Under the agreement, inter alia, Korea will agree to eliminate beef tariffs over 15 years; wheat, wine and some horticulture tariffs immediately; and most dairy tariffs over three to 20 years, with immediate duty-free increased quotas for cheese, butter and infant formula.

The agreement is expected to provide new market openings for Australian service providers in education and financial services. These services currently face a range of restrictions, including with respect to commercial presence, cross-border supply and licensing requirements. Under the agreement, Korea will permit new Australian access in these sectors, providing outcomes equivalent to those in its free trade agreements with the US and the EU.

The agreement also includes an agreement on intellectual property. KAFTA will ensure Australian innovators and Australian creative industries receive high levels of protection in Korea broadly, equivalent to protections provided here in Australia. There is an agreement on government procurement. For Australia, this will provide, subject to agreed exceptions, national treatment for Australian goods, services and suppliers in the Korean market for government procurement above agreed value thresholds. KAFTA contains provisions that safeguard electronic commerce, prevent the imposition of customs duties on electronic transmissions and maintain best practice regulations in this field.

Business and industry have welcomed the proposed free trade agreement with Korea because the agreement provides benefits and opportunities on a number of levels. Apart from the obvious direct benefit of reduced tariffs and increased market access, they have identified competitive advantage, protection of existing markets and the positioning to take advantage of future negotiating opportunities as positive outcomes.

Reduced tariffs and increased market access will provide an immediate boost to trade. For example, the dairy industry expects to increase its exports to the value of $7.6 billion in the first year of operation of the KAFTA, and there will be continual growth thereafter. The dairy farm manufacturing export industry is currently worth $13 billion a year to the Australian economy, and Korea is the 10th largest market for dairy. If KAFTA is introduced before the end of the calendar year 2014—of course, that is our intention—and the beef industry can take advantage of a double tariff reduction, Meat and Livestock Australia estimate that the red meat industry will benefit the tune of $408 million over the next 15 years. For the Australian Agricultural Company, for whom the Korean market is currently worth $35 million, the expected reduction in the tariff differential between Australia and their major competitor, the United States, from eight per cent to 5.34 per cent represents a significant increase in trade value.

For the horticultural industry, KAFTA is particularly welcomed, as the industry has faced higher tariff barriers in the Korean market. Australian potato growers, such as Mark Pye in my electorate of Barker, already hold a 37 per cent market share of the Korean potato import market, worth $11 million to $12 million annually, with an existing 27 per cent tariff. That tariff can reach 304 per cent if the above quota tariff clicks into force. With tariffs due to drop to zero with the implementation of KAFTA, the market is expected to double.

Australian nuts are an expanding horticultural sector, not just nationally but particularly in Barker. I speak here of almond production but also the burgeoning industry of macadamias in my electorate. The 30 per cent tariff on Australian macadamia nuts, for example, will be reduced to zero over five years, and exports are expected to grow from 175 tonnes with an annual value of $3 million to approximately 2,000 tonnes with an annual estimated value of over $40 million.

The wine industry too is enthusiastic about the opportunities presented by the Korea-Australia Free Trade Agreement. The 15-per-cent tariff on Australian wine will reduce to zero on entry into force. In 2013, the industry held approximately four per cent by volume of the Korean market, but expects that market share to increase to 15 per cent over the next two to three years against global competitors. Of course, Barker is the electorate that by area represents the largest wine-grape-growing areas of the country. That industry in particular is under increased pressure as the volume of wine being produced ever increases and we need to seek fresh markets at all opportunities. The Korea-Australia Free Trade Agreement is a step most significantly in the right direction.

However, it is the competitive advantage that the KAFTA presents that provides significant potential for many Australian industries. The Winemakers Federation of Australia believes that exports to Korea have been steadily decreasing since 2007, largely because of the Korean free trade agreements with the US and the EU, as well as with Chile. The wine industry sees the Korean market as a major growth opportunity and the KAFTA will enable the industry to compete, again, on a level playing field.

The Australian Nut Industry Council states that Australian growers have sold almost no almonds to Korea since the Korea-US FTA came into effect in March 2000, reducing the US tariff to zero. The entry into force of KAFTA will reduce the tariff for Australian almonds from eight per cent to zero, putting Australian industry back on an equal footing with the US industry. The Korean market imports 20,000 tonnes of almonds annually, worth $160 million.

Korea is Australia's third-biggest export market for Australian beef, worth a staggering $788 million last year alone. Elimination of Korea's 40 per cent tariff on beef will occur in 15 equal stages. Korea will eliminate its 18 per cent tariff on bovine offal and its 72- per-cent tariff on processed beef products over 15 years.

Australia exports $317 million worth of wheat to Korea annually. Under the KAFTA, Korea will eliminate its 1.8 per cent tariff on wheat from Australia. A tariff of eight per cent on wheat gluten will also be eliminated.

Australian dairy exports to Korea were worth $87 million in 2013, despite very high tariffs. The industry will benefit from immediate duty-free quotas for key exports and the elimination of tariffs by up to 89 per cent on most dairy products.

There are key KAFTA outcomes that cheese, Australia's main dairy export, will enjoy: liberalised trading, including an immediate duty-free quota of 4,630 tonnes growing at three per cent compound per annum;. progressive elimination of a 36 per cent tariff over periods ranging from 13 years for cheddar cheese; immediate duty-free quota of 113 tonnes for butter; elimination of eight per cent tariff on dairy spreads; infant formula will receive an immediate duty-free quota of 470 tonnes; and tariffs on a range of other dairy products such as milk, cream, ice cream and yoghurt will be eliminated over a period ranging between three and 20 years. Korea will also eliminate its out-of-quota tariff of 269 per cent for malt and 513 per cent for malting barley over 15 years.

For some of Korea's more sensitive horticultural products seasonal tariffs will be eliminated during Australia's exporting months: for potatoes, tariffs of up to 304 per cent, as I have previously indicated; for table grapes, tariffs of 45 per cent will halve to 24 per cent on entry into force and will be eliminated over five years for the months of December to April; oranges, of course, from the Riverland—Australia's premier citrus growing region is in the northern part of my electorate—will see tariffs of 50 per cent fall to 30 per cent on entry into force and be eliminated over seven years for the period from April to September each year; with mandarins, the high tariff of 144 per cent will be eliminated over 18 years during the months of April and September each year; and tariffs of between eight and 30 per cent on rapeseed oil, or canola, will be eliminated over a period of five to 17 years. It should be noted that Korea imports rapeseed oil to the value of $36 million from Australia, or at least it did so in 2013.

Korea will eliminate, on the agreement's entry into force, its three per cent tariff on cottonseed. Australia's exports were worth $36 million in 2013. Korea is also set to eliminate its 22.5 per cent tariff on all sheep and goat meat over 10 years. Tariffs on key pork exports of between 22.5 and 25 per cent will be eliminated over a period of between five and 15 years. Key seafood products such as rock lobster, fished predominantly from the Southern Ocean in my electorate of Barker, will enter duty free after three years.

As you can see, Australia, and regional Australia in particular, is an enormous beneficiary from this agreement. The areas I have listed are all key industries in my electorate, and a reduction in trade barriers will lead inevitably, and thankfully, to their expansion. The expansion of these industries necessarily means an expansion of jobs, the creation of jobs, in my electorate. I am unapologetic in my support for government initiatives that encourage business and industry to create and sustain jobs. I commend this bill and this agreement to the House.

Pat Conroy (Charlton, Australian Labor Party) Share this | Link to this | Hansard source

At the outset let me make it very clear that Labor supports the Korea-Australia Free Trade Agreement. This is an agreement that delivers significant benefits to certain sectors of the economy, and the previous speaker highlighted the main beneficiaries, which are in the agricultural sector. That is a good thing, but it should be noted that the agricultural sector employs 300,000 people in this country out of a workforce of over 11 million. We should be delivering benefits to the agricultural sector, and I am happy that KAFTA does that, but I am nervous about some of the other aspects of this agreement.

To be serious, this agreement was poorly negotiated, and Labor has highlighted serious reservations with the agreement. We have outlined changes that we would pursue both in opposition and in government. Nevertheless, we support the Korean free trade agreement and we support free trade in general. We are a party of free trade, and we are a party that pursue multilateral free trade as the best course of action. Bilateral free trade agreements are a poor second choice in most times. But we do support free trade, and let us have none of these absurd reductionist arguments that, because we express concerns about aspects of free trade agreements, we are suddenly not for free trade. That is certainly not true.

We look at the actual facts of these matters. If you look at the recent Productivity Commission review of bilateral preferential trade agreements—or FTAs, as they are more commonly known—the Productivity Commission had some very interesting conclusions that we should be all very cognisant of. They included their finding that the increase in national income from FTAs was likely to be modest—quite modest, in fact. They found that there was little evidence that businesses gained substantial commercial benefits from FTAs, and they also found that modelling and claims by governments when FTAs are announced tend to oversell the economic value of these agreements to Australia. The Productivity Commission also highlighted the few benefits and the very considerable risks that occur when FTAs cover intellectual property and investor-state dispute settlement clauses, which I will return to in more detail later.

There can be no greater example of an FTA claiming great benefits but delivering very little than the Thai FTA. This is an agreement that was trumpeted by the Howard government as delivering real gains not just for the agricultural sector but for certain parts of manufacturing, and most especially the automotive sector, where there was great hope that the Ford Motor Company could export a lot of the Ford Territory—which is an excellent vehicle, a large vehicle, termed a medium SUV—into the Thai market. There was a great fanfare when we heard the announcements about the tariff reductions and everything else that was associated with it.

What happened? Within weeks of the FTA being signed and being implemented and tariffs being reduced on both sides of the ledger, the Thai government introduced a new motor registration and excise scheme that penalised vehicles with large engines. They effectively penalised vehicles imported into their country with large engines. The classic example was the Ford Territory, so exports of the Ford Territory to Thailand were hit with a cricket bat, and that was a market that never really eventuated. This is an example of an FTA promising to deliver lots, but, when behind-border measures interfere with that, we see consequences that are quite negative. That is not an argument against FTAs, it is not even an argument against multilateral free trade agreements; it is just an observation that often these agreements are oversold in terms of their benefits and that what really matters is the change in behaviour both by government and companies when FTAs are implemented.

If I can turn to the details of the Korea-Australia FTA, the most worrying aspect of this free trade agreement is the provisions around investor-state dispute settlement clauses—ISDSs as they are referred to—which give rights to foreign corporations, rights which do not accrue to domestically based companies, to sue governments for actions or decisions they take that might impact on the commercial operations of those businesses. The classic example of that, going on right now, is: the Hong Kong arm of Philip Morris is suing the Australian government for our actions around plain packaging for tobacco products—a piece of health reform that is already making significant impacts on reducing tobacco consumption, will reduce cancer rates within this society and save the Commonwealth billions of dollars and tens of thousands of lives. This is a great health reform that is being challenged under an obscure ISDS clause of a free trade agreement.

This is particularly worrying because this impacts on the sovereignty of nations. This parliament, on behalf of the people of Australia, has the right to legislate in the best interests of Australians. ISDS clauses interfere with that and, most notably, they give rights to foreign corporations that do not accrue to Australian corporations, and that is a real concern.

One area where we will see this more and more is around environmental regulation. This bill, with some caveats that you could drive a truck through, gives rights for Korean mining corporations to sue state and federal governments that make decisions around mining approvals. The classic example of this potentially in the future is a coalmine called Wallarah 2 in the seat of Dobell to the south of me. This is a coalmine proposal that has stirred up quite contentious public discomfort. Before the last election, former Premier Barry O'Farrell and the disgraced resources minister Chris Hartcher made a promise that this mine would not go ahead. Subsequently, it is going through its consent process—and I am not commenting on the actual merits of the case, but by the Wallarah 2 coalmine proposal being owned by a Korean company that company now has a potential right to sue the New South Wales government if the New South Wales government decides not to approve that mine—a right that BHP does not have, a right that Rio Tinto does not have, a right that any other Australian based coal mining corporation does not have. That is a significant concern.

We have already seen these ISDS provisions exploited in other countries on environmental regulations. For example, there have been some notable cases in Canada as well. It is a real concern. These ISDS provisions do occur in other FTAs Australia has signed and we should not be including them. The sovereignty of this parliament should not be restricted by free trade agreements. I am proud to say that Labor has said that in government we would seek to renegotiate this aspect of the Korean FTA, to remove these objectionable provisions.

The second concerning aspect of the Korean FTA is around copyright and IP provisions. I want to refer in some detail to the excellent contribution by the member for Gellibrand, who is an IP lawyer and who sat on the treaties committee and made some very trenchant observations about the IP provisions of this treaty. He has stated that the IP section of this treaty is one of the most mendacious examples of policy laundering that we have seen in recent times. The consultation attachment of the national interest analysis of the KAFTA provides that, 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 v iiNet, which found that ISPs are not liable for authorising the infringements of subscribers. This characterisation firstly is frankly wrong in law. The High Court's decision did not change anyone's legal rights or obligations. It merely confirmed the scope of the obligations which have been well understood by the industry.

The House should be under no illusions that the terms of the authorisation liability safe harbour provisions have not changed in law since the implementation of the US FTA. This was the finding of the member for Gellibrand, and I agree with him completely on this case. And to use a trade obligation in this case, a very peculiar interpretation of this FTA, to circumvent the democratic debate over the merits of a policy initiative around copyright protection, is bizarre and I think it is not a good public policy outcome.

And what is happening here is the Attorney-General's Department has decided, unilaterally, that there is a risk that Australia could be perceived as being noncompliant with its US FTA obligations. And as I understand it, this is without any correspondence or prompting from the United States government. It is apparently also being done without consideration for whether this view should be tested legally.

If the Abbott government wants to reform Australia's Copyright Act, it should make the argument for this change on its merits. It should not hide behind an FTA, or use an obscure interpretation in this FTA, to drive a change that is quite inconsistent with the legal advice of most legal practitioners in this area. I am very happy to say that Labor has stated its concerns about the intellectual property provisions of this agreement and we have made it very clear that we will determine our position on any changes to the Copyright Act when they are made public.

This is part of a broader problem with FTAs, which is when they intrude into areas of intellectual property. DFAT has confirmed that none of the economic modelling done to justify the Korean FTA, around the benefits of the agreement, even considered the impact of the IP provisions of the agreement. And this is a gaping hole in the economic modelling of this agreement. This is important because the Productivity Commission's review of FTAs that I quoted earlier, quote a study of IP provisions that found that the Australia US FTA agreement has cost Australia nearly $1 billion through copyright changes that hurt the Australian economy. The Productivity Commission also found that it tilted the balance towards IP supplier interests over consumers. This is a dramatic concern. This is a concern that has not seen in the light of day. We are very focused on the benefits to agriculture—as we should be, and there are significant benefits to agriculture in this FTA—but we need to balance that against copyright changes that have not been tested, have not been modelled, include a bizarre interpretation of recent High Court changes and include ISDS provisions that threaten our sovereignty.

The third concern that Labor has flagged around the FTA is around the removal of the requirement for labour market testing for migration by Korean nationals. Labor believes that the government should require employers to show there are skill shortages if they wish to utilise KAFTA provisions on the movement of people. The government has informed the parliament that these provisions will not result in a significant increase in the use of section 457 visas and Labor will hold the government to account on this undertaking. This is a significant concern if this FTA is being used as a backdoor to bring in section 457 visa workers without genuine labour market testing. Labor is not opposed to the use of section 457 visas when it can be shown that Australians are not available to do the jobs that they are bringing in those workers for.

The fourth concern is around the provisions around the reduction in automotive tariffs. Unfortunately, this is a case of well and truly closing the barn door after the horse has bolted. It is well known that debates around the auto tariff provisions and ISDS were the two reasons why this agreement was not signed by Labor in government. Quite frankly, this government has removed one of those concerns by destroying the automotive industry. Within four months of coming into power, they have forced Holden and Toyota to leave this country by their $1½ billion cuts to the Automotive Transformation Scheme, and so they have removed the concerns around reductions in automotive tariffs. That is a real tragedy, because what we are seeing are 50,000 direct jobs going and another 200,000 indirect jobs going. Let us just put that in context: there are 300,000 workers in the agricultural sector and significant shares of that industry will benefit from this FTA, and that is a good thing. But we need to contrast that with this government destroying an industry that directly employees 50,000 workers and another 200,000 workers in the supply chain.

So this is an FTA that Labor has decided, on the broad merits of it, is justified, but we flag our significant concerns with it in the areas of ISDS, intellectual property, labour mobility and the treatment of the automotive sector.

I would also like to flag that I have significant concerns with how we are negotiating the Australia-China Free Trade Agreement. First off, I think it was a massive mistake by the Prime Minister to set an artificial negotiating deadline of the visit by the Chinese leadership to this country for the G20. I was in China on a delegation last month, and the Chinese were not hiding the fact that they regarded this date as a great opportunity to place pressure on Australia to accept a substandard agreement. I am voicing my concerns in advance to see what this government can deliver on the China FTA, but if that Korean FTA is any example I hold out few hopes, and I fear that we will be getting another substandard agreement. Nevertheless, Labor will support this agreement with the reservations that I have highlighted, and I thank you for the opportunity to speak.

John Cobb (Calare, National Party) Share this | Link to this | Hansard source

I rise to speak on the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014 and cognate bill. Exports are important to us because we are a country, particularly agriculturally, totally dependent on our ability to establish, maintain and develop trade relations with other countries.

There is a lot of talk, justifiably I believe, about the power of supermarkets in Australia. The best way for Australian agriculture to deal with supermarkets is to not need them. The way to not need them is to have good customers and good markets, and to export a good Australian product overseas.

I see this deal as extraordinarily important as one among others that we have to deal with and develop into maintaining a profitable Australian economy, particularly a profitable agricultural economy. This is undoubtedly—while it is not perfect, it will deliver great benefits to—

A division having been called in the House of Representatives

Sitting suspended from 10:33 to 10 : 47

To resume, we have a long history as a trading nation with an open, diverse and resilient economy. As I said earlier, two-thirds of what we grow, in agricultural terms and particularly in Calare, is exported to all parts of the world.

The Korea-Australia Free Trade Agreement does ,without doubt, add greater strength to our reputation and our ability to be one of the world's highest quality exporters—especially in key target areas such as Korea, our third largest export market and fourth largest trading partner. We must never forget that our greatest trading asset is our reputation for a very clean, green, high-quality product which is sought after around the world. Eighty-four per cent, initially, of our exports to Korea will enter duty-free after full implementation. In 15 years, the agreement will see no tariffs on 99.8 per cent of our exports. This helps level the playing field with some of the world's big exporters, including the US, and all exporters will benefit.

The beef industry is probably the best example of why the previous government should have concluded this before, when they had the opportunity. If they had not totally 'annoyed'—to be polite—the Korean government, I believe this would have happened. Beef is our biggest agricultural export to Korea; it was worth almost $800 million last year. Korea is our third biggest market for our beef. This agreement will see the elimination of Korea's 40 per cent tariff on beef over the next 15 years. Korea will eliminate its 80 per cent tariff on bovine offal as well over 15 years—and our exports of offal to Korea were worth nearly $70 million last year. Korea will also eliminate its 72 per cent tariff on processed beef over that same time frame.

KAFTA will provide a quick tariff elimination to most, but not all, of our horticulture exports to Korea. Cherries, for example, like beef, are a huge issue for people in Korea, be they on the land or be they not. Tariffs on cherries of 24 per cent; almonds and grapes—grapes come down to 21 per cent; asparagus. Any amount of horticulture really does well out of it—macadamia, citrus, tomato. This is going to be eliminated over five years. Tariffs on tomatoes—which have a 45 per cent tariff, and apricots the same—will be eliminated over the next seven years. Tariffs on our fruit—our mangoes, peaches, plums, peanuts—in their varying percentages, from 30 to nearly 64 per cent, will be eliminated over 10 years. Oranges, mandarins and kiwifruit will also have their tariffs eliminated.

Given Australian wine production has lifted so much over the last 20 years, the agreement with Korea—not due to Calare, which, I must say, does have some of the better wine in Australia. I am not one to skite but you are welcome to come and find out just how good it is! So this is really a big issue for Australia—not just my part of it but for the wine industry. Currently they face a 15 per cent tariff, and this includes sparkling wine, red wine and white wine, which will now enter Korea duty free.

I also expect the KAFTA to help revive the falling export dairy market. Dairy is another agricultural industry which is important to my part of the world but obviously huge to Victoria and Tasmania. They were worth nearly $90 million last year, which fell $20 million from 2011. The industry will benefit from immediate duty-free quotas for key parts of the dairy industry and the elimination of tariffs—up to nearly 90 per cent—on most other dairy products. Always, like with every other agricultural product in Australia, the dairy industry is dependent on the strength of its exports. Once again, I would love to see the dairy industry in New South Wales and Queensland, for example, become far more export orientated so they would be far less dependent upon our supermarkets.

Cheese, which is the main dairy export to Korea, will enjoy liberalised trade including an immediate duty-free quota of 4,600 tonnes—and that grows at three per cent per annum compound as though it was interest—and progressive elimination of the 36 per cent tariff over periods ranging from 13 years for cheddar cheese to 18 years for cream cheese, with all cheese tariffs eliminated over 20 years. Dairy and beef are actually two very sensitive issues in both Japan and Korea, so they have done a very good job here. The minister has done a very good job.

Infant formula and a range of other dairy products such as milk cream, ice cream and yoghurt: Korea is actually our biggest—

A division having been called in the House of Representatives—

Sitting suspended from 10:54 to 11:08

One of the other things which Australia has really picked up its game in is the export of lamb in recent times. In the case of Korea, they will eliminate their 22½ per cent tariff on all sheep and goat meat over 10 years; pork in five to 15. That is good news not just for Calare but for Australia.

The economic modelling of KAFTA undertaken by the Centre for International Economics estimates that goods liberalisation alone will be worth nearly $5 billion in additional income to Australia between 2015 and 2030. Exports to Korea over that time should be 25 per cent higher than they would have been otherwise without this free trade agreement—not just agriculture; mining and manufacturing exports will be far, far better off. And the job situation in Australia reflects that increase. Quite honestly, this agreement protects our competitive position in the Korean market. I think I mentioned beef earlier—how big that was. We looked as of January this year. Without this agreement, we were going to be some eight per cent worse off than the USA, who are our main competitors in the beef market with Korea.

To sum up the whole situation, I think KAFTA is a world-class agreement. It does provide new opportunities for Calare and Australia. It also confirms our standing as a reliable quality exporter. I want to talk about that for a second. I think that in the years after the war Australia was very protectionist, but the thing that we have learnt over the years is that it does tend to make you somewhat lazy. If you are protected against exports then you tend not to take up new technologies, not to spend the money on becoming more efficient, to increase productivity, quality—the lot. And Australia has learnt that. Also, we must never forget that we are a very export orientated country, as I said earlier. If we do not liberalise our own position, we are not going to get our products into other countries around the world.

We have learnt over the years that protectionism does have its bad side—as well as admittedly its good, to establish industries. There are things that are still missing in this agreement, like canola, rice, milk powders, apples and various other products, which it would have been really good to have in there. I think that, as Korea realise that they are dealing with the best quality products that can be got in the world, which they get from us, they will always know that we are as tough on the quality of our exports—tougher, I would say—as on what comes into Australia. They will know that they will always get a good quality product from us, that we are reliable suppliers and that we are very efficient suppliers. I think that, as they realise—as they must be somewhat aware now—what a good country we are to trade with and how their own industries will lift their game when they have to, we shall and we must get some agreement with them in the future about those products which so far we do not have.

I congratulate the minister on getting this agreement. It should have happened over the last six years, particularly for beef, but thank Heaven it has. Let us hope that, in the time to come, those issues that are not resolved will be and that we continue to be very good suppliers to and traders with the country of Korea.

Alannah Mactiernan (Perth, Australian Labor Party) Share this | Link to this | Hansard source

I want to confirm that Labor does support free trade agreements, as we are a trading nation—indeed, we are an exporting nation—and we need to develop our markets. In particular, in Western Australia we are an even greater trader. Basically, over 80 per cent of what we produce in Western Australia is exported. So we recognise the need for bilateral agreements. We recognise that, whilst multilateral arrangements are preferable, there has been an amazing constipation in the negotiations for many of these significant multilateral agreements, so it is understandable that the Australian government, as Labor did, seek to negotiate a bilateral raft of trade agreements. Of course, these agreements with our Asian neighbours are a very critical part of our future.

I want to make a couple of comments about Korea. I was actually there earlier this week. It is a nation that has achieved enormously over the last 60 years. It has gone from being one of the poorest nations of the world to now being very much a developed country. Even in recent times, we have seen a marked leap in the GDP. Last year, the per capita GDP of Korea was $26,000. When you consider that in 1981 the per capita GDP was less than $2,000, you can see the growth that has occurred in this country. It is a strong democracy. Through my contacts with Korean members of parliament and through the Australian Political Exchange Council, I know that it is a very robust democracy where there is a strong contest of ideas. I want to preface my remarks by saying I totally respect and support us entering into a free trade agreement with Korea, but this is an agreement that has many, many problems. My view is that we have seen the government rush into this agreement. They pledged that this was going to be one of their 100-day achievements, and it was far more important for the government to have been able to tick that box of having achieved this, rather than putting Australia's national interest in the forefront.

There has been much discussion about the problems with this agreement. The inclusion of the investor-state dispute resolution provisions will be touched on by a number of my colleagues. I do think they are very, very significant problems. The whole notion that we would allow a foreign company to have greater recourse than our own companies have to contest government legislation is most inappropriate. I see these investor-state provisions detracting in a very significant way from our sovereignty and our rights to ensure that we make legislation for the good of our community. The inclusion of these investor-state provisions—which give investors the right to contest legislation that they believe harms their interest—gives only foreign investors the right to do that. I think this is extremely worrying indeed. The exceptions that have attempted to have been carved out in this agreement will be inadequate to provide decent protections and as it has been demonstrated—my other colleagues will go into the detail—where those particular clauses have indeed proved to be inadequate to provide protections on what any of us would consider would be legitimate activities of government in legislating.

What I particularly want to focus on today is the free movement of people provisions and the extraordinary asymmetry that exists in this legislation between the rights of Koreans to enter Australia and to participate in the Australian workplace, and the rights of Australians to enter Korea and participate in their workplace. If you look at some of the statements that the government has made, there is really no reference to this asymmetry and to the extent of this asymmetry. What we have allowed here is a massive capacity for us to lose control of the 457 visa system. Let us have a look at what is provided for.

This agreement allows for a Korean person who has a trade, a technical or professional skill, is experienced and has the existing qualifications, can come to Australia and work in Australia without there being any labour market testing. It is not confined—the person could be someone who is employed by a Korean company who has a contract in Australia to provide certain services. They could be that, but need not be. It can be any enterprise lawfully operating in Australia. It could be any Australian company; this is not confined.

We are not talking here about people who would necessarily have to have a high level of proficiency. It could be a trade—and I am not in any way demeaning trades. We are talking about people who could be bricklayers or electricians, or people who had qualifications in meat working—people experienced, qualified boners, for instance, qualified to do the various trade activities that are found in abattoirs. The bar has been set very low here. No market testing is required and the range of skills is very broad. Anyone with a trade or a technical or professional skill can be considered. They can work for a Korean company that is based here or they can work for any company that is legitimately operating in Australia.

If we go and look on the other side at what Australians are going to be able to do in Korea we find that it is very different. For a start, there is a different definition for a contractual service supplier. For an Australian it is someone who has to demonstrate a high level of skill, and there is a very detailed set of skills set out in one of the annexures. What is very interesting, I think, is that unless you read the agreement in detail you do not realise that that definition only applies to Australian workers seeking to take up residency in Korea. So we have a very restricted arrangement. We have got to show that we have a high level of technical, professional or managerial skill. It only applies to people who are working for an Australian company that is operating in Korea, that previously did not have a presence in Korea. So it is a really limited range of companies that it can apply to, and you have to demonstrate that you have already been working for that company for a year prior to your entry into Korea.

On top of that, they retain a couple of interesting rights, firstly, the right to numerically restrict it and, secondly, the right to do labour market testing. They also have another very curious provision within the legislation that gives them the right to exclude anyone on the basis that they might be involved in in a labour market dispute. The capacity for Australian people to go up into Korea is extraordinarily limited and it is at all times subject to labour market testing.

But on the other side, what we have achieved is extraordinary asymmetry. I was looking at the agreement that we have with Chile, an agreement that was entered into by the Australian government where there is almost complete symmetry between these two and we talk about having to establish a very high level of technical skill or professional expertise. But unlike any of the other agreements, here in the Korean agreement we have absolutely lowered the bar. We have absolutely reduced the requirement, the skills component, the level of skill that has to be demonstrated before one comes into the country.

We have already seen what has happened with Korean companies in Western Australia. We know that when Samsung got the contract to develop the Roy Hill mine they brought in hundreds of Korean workers. Complaints have been registered—and we understand that there is an investigation as to the allegations made, but the investigation is being kept secret. We understand that the allegations have been made by very well-placed whistleblowers about the operation of this company, that people brought in as engineers were indeed doing the work of administrative staff. So even under the existing 457 visa arrangements there was an alleged breach of the regulations.

And I know from what workers have been telling me out there that the Korean workers are required to do a swing of four months on. They are working up to 84 hours a week and they are being paid as little as $16 an hour, circumstances and conditions that are well and truly less than what Australian workers would receive in similar circumstances. The Korean company were very insistent that they bring their own people in.

We have now opened up a huge capacity for people—and not just for Korean companies but for other companies—to just import, wholesale, people from Korea without any regard to unemployment in Australia. This is not going to just be limited to remote sites. We now will see the capacity for people—if you are running a factory somewhere—to bring in Korean workers, as long as they have got some technical qualification—and it could be a very limited technical qualification.

I am really keen and enthusiastic about the beef market and opening up the packaged meat market. For the North of Australia and for the Kimberley in particular, I see a great potential benefit for us to be able to finish off our own stock rather than sending our live exports to Indonesia, to be able to value-add and to be able to create jobs, particularly for Aboriginal people, who have skills in boning and slaughtering techniques. This would be an ideal opportunity. But one of my real concerns—I can see what will happen now—is that we will get Korean-owned abattoirs being established, or any abattoir being established, where Korean workers will be brought down to staff that abattoir, and the necessity to develop Australian labour and create those opportunities in the North of Australia are going to be lost.

I want to repeat that this is a very bad agreement. There has not been honesty and transparency with the Australian people about the true asymmetry of this agreement and just how broad those entitlements are going to be for Korean people to come here and, totally without labour market testing, to work here at a time when we have rising unemployment. This is a dishonest agreement and I think it augurs badly for the current raft of agreements that we know are being negotiated. I ask the government to take stock about what it is they are doing here and to not repeat this travesty in the next agreement. (Time expired)

Nickolas Varvaris (Barton, Liberal Party) Share this | Link to this | Hansard source

I rise to lend my strong support to the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014, which amends the Customs Act to give force to the Korea-Australia Free Trade Agreement signed on 8 April of this year. This is an agreement which reflects and strengthens the close bilateral relationship between our two nations, significantly improves our access to the Korean export market and contributes to an overall movement towards liberalised trade between Australia and Asia. Australia and Korea have a close bilateral relationship, a relationship built on a foundation of mutual interest, shared values and a strong trading partnership.

In 2013 two-way trade between Korea and Australia was worth $32.1 billion. Korea is Asia's fourth largest economy, our third largest export market and our fourth largest overall trading partner. One reason why this free trade agreement is so significant is that it represents the cutting edge, the first major breakthrough, onto the frontier of preferential access agreements with Asian markets generally.

The Asian nations of China, Japan and South Korea together comprise a 50 per cent share of the Australian export market, with the Korean market on its own comprising a sizeable proportion of this market share. This indicates that our access to Asian markets is truly the key to building on our prosperity into this century. These markets are of such significance to Australian trading prosperity that our access to Asian markets must be maximised into this century and we must find ways to encourage investment in our uniquely Australian industries, especially our primary and agricultural industries.

As the Joint Standing Committee on Treaties found, the opening up of Asia's major markets is essential if Australian businesses are to successfully compete with the world in the years ahead. Indeed, before the conclusion of the Korea-Australia Free Trade Agreement on 8 April, significant free trade agreements with Korea had already been established between Korea and their other major trading partners, such as Chile and the USA.

If our nation intends to pave the way forward for an even stronger relationship with Korea, we must adapt to the way in which other nations are engaging with the Korean market. After all, the Korean market, according to the Australian dairy industry's submission of 2009, often depends 'more on price and availability than long-term customer-supplier relationships'. It said:

… it is important that we not only strive to achieve any advantage that we can find but also that we ensure that our competitors … do not have any advantage brought about by preferred access arrangements.

We must adapt to the global state of competition and preferential access if we are to remain competitive and expand our share of the Korean export market. Free trade agreements, which could also be termed 'preferential access agreements', have received a strong vote of confidence from trade and industry bodies, including in relation to the Korea-Australia Free Trade Agreement. Preferential access in the context of the Korea-Australia Free Trade Agreement will mean that 84 per cent of Australian exports to Korea will be tariff free immediately—a figure that will increase to 95.7 per cent after 10 years and settle at 99.8 per cent tariff free upon full implementation of the agreement.

Such agreements grow firmly out of the ethos of this coalition government. Whether it be from the Liberal Party's commitment to liberalisation of markets or the Nationals' commitment to a strong export market, free trade agreements have always had a strong vote of confidence from this side of the House, in the coalition. As a member of the coalition, I firmly believe in the power of trade as the key to prosperity. When nations open their doors to investment, to import and export, their economies flourish and jobs are created. Australia has gained a sense of true pride in being such a quality exporter to Asian markets. Indeed, in Korea, our pork and beef products are known to be among the cleanest and highest quality imports in the nation.

Free trade agreements achieve three major objectives: Firstly, they encourage the liberalisation of markets—a key commitment of this government, which ratifies the Prime Minister's initial declaration that Australia is 'open for business'. Secondly, they open up market access for Australian exporters and Australian consumers. Thirdly, they strengthen the already close bilateral relationship between two major trading partners.

Failing to support action to remain competitive would mean that there is no viable alternative plan for the maintenance of our national prosperity. If our major competitors have concluded agreements of this nature, our market access to Korean markets will weaken. I am proud and grateful to be part of a pro-trade government that has entered into this important agreement wholeheartedly, where an alternative government would not have done the same, forfeiting growth, jobs and prosperity for the decades ahead.

The fact that this agreement has been successfully concluded within the first term of an Abbott coalition government, where other attempts have fallen short, should instil confidence in the people of this nation that, when the coalition is at the reins, the creation of prosperity is an absolute priority. If the Australian government of today had said no to this free trade agreement, Australian exporters would still be facing prohibitive barriers of, on average, a tariff of 53.6 per cent on agricultural imports and prohibitive tariffs on some products of up to 550 per cent. Australian exporters would face a reduced level of competitiveness, forfeiting an expanded market share and a strengthening of the significant Korean investment.

The coalition wants to be a friend to Australian industry. The coalition wants to stand by the comments of such an authority as Ian Murray AM, Executive Chairman of the Export Council of Australia, who says that the Korea-Australia Free Trade Agreement is particularly important to those exporters who have not been competing on a level playing field in Korea. He says:

It is a huge breakthrough—the value of which should not be underestimated.

Mr Murray's statement is absolutely correct. The main export markets which stand to gain in a big way from this free trade agreement are raw sugar, beef, wheat, malt, barley, dairy, wine, seafood, horticulture, ores, concentrates, petroleum, coal, chemical elements, pharmaceuticals and automotive parts.

It is legitimately exciting to consider the wide range of benefits that the conclusion of this agreement will bring about for Australian industries, and I will be happy to see these benefits culminate in a return to the farm gate and a boost in prosperity for regional Australia. I must say that the Minister for Agriculture has been steadfast on this point in alliance with the Minister for Trade and Investment.

It was heartening to review the submissions to the feasibility study on the Korea-Australia Free Trade Agreement and to witness such a variety of quarters urging the Australian government to proceed with this significant agreement. Key submissions came from the Western Australian Department of Agriculture and Food, the Ricegrowers' Association of Australia, the Generic Medicines Industry Association, Australian Pork Limited and the Australian dairy industry. The Export Council of Australia and the Australia Korea Business Council also made known their strong support for the proposal.

I would like to take a few moments now to read some of the clearest messages received in these submissions. The Western Australian Department of Agriculture and Food called the Korea-Australia Free Trade Agreement 'a big opportunity to help strengthen the businesses of Western Australian farmers and agrifood businesses'. They warned that failure to approve the agreement 'would be a substantial missed opportunity' in the light of other potential Korean and Australian free trade partners.

The Ricegrowers' Association of Australia supported the Korea-Australia Free Trade Agreement with the view:

… South Korea is an important market for the Australian rice industry …

The Generic Medicines Industry Association indicated:

… exports of medicines have shown the strongest growth of any major Australian manufacturing export to the Republic of Korea.

Australian Pork Limited gave some of the most enthusiastic support for the agreement, looking to the future in its statement:

… with Australia's high herd health status Korea can become an even larger export market.

It said:

… Australia cannot realise this market potential without an FTA.

Similarly, the Australian dairy industry used strong language in its submission, urging the Australian government to 'commence negotiations as soon as possible to achieve a substantial liberalisation of dairy trade between the two countries' and pointing out that the industry is 'keen to capitalise' on the growth of 'one of the world's most valuable and fastest growing dairy markets'.

Primary industries make up the backbone by which the whole of Australia is supported. Measures that free up export markets and benefit these pivotal industries will ultimately benefit us all. But the benefits that we will see come back to the farm gate and to the Australian industry as a whole are just one element of this agreement. The preferential access which Korean imports will be given in Australia represent a huge gain for all kinds of Australian consumers. As the member for Barton, I am keen to see my constituents benefit from a range of Korean goods becoming more affordable via preferential access—goods which will include refined petroleum; telecom equipment and associated parts; pumps; heating and cooling equipment; and motor vehicles.

Ultimately, these bills are about our longstanding support as government for the liberalisation of trade. These bills, and the free trade agreements that our government support as a whole, stem from our belief in breaking down barriers between Australia and our partners, our belief in being competitive on the international stage and our belief in job creation and staying ahead when progress is made by our competitors. These bills stem from our belief in strengthening the bilateral ties between our nation and our partners, especially our Asian partners, our belief in the openness of trade and exchange and our commitment to winning the benefits for the average Australian consumer. They demonstrate our commitment to a fair go for regional Australia and delivering benefits to the farm gate. For all these reasons, I am confident in commending these bills to the House.

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

I want to acknowledge and congratulate the Australian Council of Trade Unions, the Australian Manufacturing Workers Union, the Construction, Forestry, Mining and Energy Union and the AFTINET for the work that they have done concerning the Korea bilateral trade agreement. I want to make it absolutely clear to the House that I share their concerns about the investor-state dispute settlement provision, about the labour market testing and work visa arrangements, about the copyright and intellectual property provisions and about the impact of this agreement on manufacturing.

I am very concerned about the labour market testing arrangements. The Korea bilateral trade agreement will allow Korean nationals to perform certain categories of work in Australia without any requirement for labour market testing to assess whether the work can be performed by Australian residents. Labor is opposed to the removal of labour market testing in bilateral and multilateral trade agreements. We believe that the government should require employers to show that there are skill shortages through labour market testing if they wish to utilise this treaty's provisions on labour mobility.

Let me be clear. At a time when we have over 750,000 Australians out of work, double digit youth unemployment and rising long-term unemployment, I think our first obligation is to employ Australian workers. It is my strong view that the number of people in Australia on temporary visas which give them work rights—which is over one million people—is way too high. The government claims that there are safeguards in place against the abuse of the various temporary migrant worker programs. But a report from Richard Baker and Nick McKenzie in The Age gives the game away; it says as many as nine in 10 skilled migrant visas may be fraudulent. There was a Somali people smuggling cell in Melbourne linked to a terrorist suspect but the investigation into that ceased due to lack of resources. Meaningful investigation and prosecution activity concerning migration fraud in the Melbourne office has effectively ceased. A 2010 investigation concluded that around 90 per cent or 40,000 visa applications in the general skilled migration program lodged per year for the previous three years were suspect. A 2009 investigation concluded that the student visa program was failing, the general skilled migration program was failing and that the falsifying of qualifications was prolific.

The key problem is that since 2004 the migration program has skyrocketed but the resources of the department have not increased to keep pace with that. The permanent migration program has gone up from 100,000 to 240,000 and we have over one million people in Australia on temporary visas who have work rights. It is simply beyond the capacity of the department to check the validity of the claims people are making about their qualifications and work experience. It is apparently even beyond the capacity of the department to close down passport swapping scams. This is not Operation Sovereign Borders; it is 'Operation Open Borders'.

I have been sent a statement by a young Irish worker about his experiences as a working holiday maker and 457 visa worker in Australia which should give us all real cause for concern about whether the protections and safeguards against exploitation of migrant workers such as those in this treaty are worth the paper they are written on. Conan Doyle is 24 years of age. He came to Sydney on a working holiday visa in 2010, when he was 20. He did not have any formal trade qualifications. He did labouring jobs, and in early 2011 he was asked by a company called Wilson Pacific if it could set up an ABN number—and he did so.

Later in 2011 he met other Irish temporary workers who introduced him to the company Lis-Con, who got him to work on the airport link tunnel. Andrew Bennett, the HR person for Lis-Con, asked Mr Doyle if he had an ABN and, when Mr Doyle told him that he did, he said words to the effect that that was good because he would not have to set one up. Mr Doyle started with Lis-Con as an ABN worker. During his time working for Lis-Con on an ABN he was paid by a number of different companies. He thought this was because it was a condition of the working holiday visa that you cannot work for a single employer for more than six months. Mr Doyle believes—and I agree—that Lis-Con paid him through separate companies to get around this condition. He adds that a lot of Lis-Con's employees are young Irish men on working holiday visas and their pay was also moved from one company to another. This looks to me suspiciously like visa fraud. I ask that the government investigate whether Lis-Con is engaged in fraud in its payment arrangements for people on working holiday visas.

But that was not their only dodgy dealing. Mr Doyle said that, in 2011, Mr Willie Dolan, from Lis-Con, offered to arrange for Lis-Con to sponsor him so that he could get work on a 457 visa. Mr Doyle states that Mr Dolan said words to the effect of 'do up your resume to say you've got four years experience as a carpenter and get someone in Ireland to vouch for you and say that you've worked for a carpenter'. This was in fact not true. After the initial conversation, Mr Dolan put Mr Doyle in contact with a migration agent named Judy Wells at Judith Wells and Associates in Currumbin, Queensland. Mr Doyle had a number of conversations with Ms Wells by phone and paid her $4,000. He says he was under severe stress and strain at this time and felt he had to lie to get his visa. Mr Doyle said that, from speaking to other workers, he knew that Willie Dolan sent all the workers that he sponsored to Judy Wells for their visa applications. Most of these guys told him that they had also lied about their work experience in Ireland.

Mr Doyle had his 457 visa granted in December 2012. Lis-Con then told him to open a new bank account into which his pay would now be paid. One wonders why Lis-Con wanted him to do that. Mr Doyle thinks it was to make it appear as if Mr Doyle was a new employee with a 457 visa. He also says that Lis-Con used ABN numbers for its workers rather than tax file numbers to avoid tax and superannuation payments. He says workers on ABNs were not entitled to medical treatment and, if an accident happened at work, they would secretly remove you from the site so your injury was not recorded, and you had to pay your medical fees and loss of income yourself.

Given these revelations, I urge the government to investigate the bona fides of the visas issued to Lis-Con workers. It is cautionary tales like this that make me sceptical about the capacity of the government to ensure that the open-ended visa arrangements we are entering into with Korea can be satisfactorily enforced. And I agree with the concerns of the CFMEU that this treaty grants labour-market-exempt status to all Korean nationals and residents covered by this treaty. I regard it as critical that we ensure that Australian workers are not disadvantaged through diminished labour-market-testing provisions.

I am also concerned about the impact on proper labour rights by a provision in the KAFTA text Annex 3B, which has been drawn to my attention by Dr Patricia Ranald of the Australian Fair Trade and Investment Network, or AFTINET. There is a sentence which says that the Kaesong industrial complex, located in North Korea, shall be identified by the joint Committee on Outward Processing Zones on the Korean Peninsula as one of the geographic areas that may be designated as outward processing zones. Now, this sentence was not drawn to the attention of the Treaties Committee by either the department or any of the witnesses and submissions, which is unfortunate because we then did not have the opportunity to tease out its significance. But it is clear enough that we are agreeing to discuss giving zero-tariff access not just to products from South Korea but to products from North Korea. I am told that there are 120 South Korean companies and 40,000 North Korean workers in the complex referred to. It certainly raises the question as to whether forced labour, or prison labour, may be involved. North Korea is notorious for having no basic labour rights. It is Australian Labor Party policy to support enforceable labour rights in trade agreements, and we are opposed to giving preferential access to products produced by forced labour, or prison labour, for obvious reasons.

Let me turn now to the investor-state dispute settlement provision. Labor does not believe that the Korean bilateral trade agreement should have included investor-state dispute settlement provisions, which give Korean firms greater legal rights than Australian firms. In government, we will continue to oppose inclusion of these ISDS provisions in trade agreements and we would seek to negotiate with Korea for the ISDS provisions to be removed. These investor-state dispute settlement provisions elevate the interests of corporations above those of the public and their democratically elected governments. They are fundamentally undemocratic.

The government says that the investor-state dispute mechanism contained 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, and one arbitrator from Spain, Juan Fernandez-Armesto, has observed, and I quote:

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 restriction or appeal procedure, all actions of the government, all decisions of the courts, and all laws and regulations emanating from 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 investor-state dispute settlement cases brought under treaties. Two hundred and seventy-four cases have been concluded. Approximately 43 per cent were decided in favour of the state. Thirty-one per cent were decided in favour of the investor. Approximately 26 per cent of cases were settled. There is every chance that these cases involve taxpayers handing over money to corporations, and nearly 300 cases remain unresolved.

Investor-state dispute settlement claims have been launched against governments all over the world. In 2011, the German government settled an ISDS case with the Swedish energy company Vattenfall, which had launched a €1.4 billion claim against the government for strict restrictions that were imposed on a coal-fired power plant it was planning to build on the banks of the River Elbe. To settle the case, the German government had to agree to withdraw the restrictions. ABC radio's Background Briefing reports that now Germany is facing another investor-state dispute settlement claim from the same energy company, this time against the decision to wind back nuclear power after the Fukushima nuclear disaster. There have been dozens of ISDS claims launched under the NAFTA, the North American Free Trade Agreement. Background Briefing reports that Canada has been sued nearly 20 times. It has lost or settled seven times, paying American corporations at least US$158 million in compensation. One case was about a fuel additive called MMT, which the Canadian government decided to ban after it concluded that it could be a threat to human health and the environment. After being sued by Ethyl, the US corporation that manufactured MMT, the Canadian government settled the case for US$13 million. To settle, it had to agree to overturn the ban and, to add insult to injury, to publish a statement declaring MMT to be safe.

We do not need, and are crazy to have, such a handbrake on government. If the reason for establishing investor-state dispute settlement is to respond to failures in national judicial systems that do not provide independent justice or enforce the protection of private property, then the right response is to fix those shortcomings rather than allow foreign investors to seek justice elsewhere. These ad hoc arbitration tribunals are not a legitimate alternative to national courts.

There are numerous other examples of the kinds of problems that this approach has generated. The House will be aware that the Philip Morris tobacco company is using investor-state dispute settlement in an obscure Hong Kong investment agreement to sue the Australian government over our plain packaging law despite the fact that the High Court found they were not entitled to compensation. The US Lone Pine mining company is using ISDS in the North American Free Trade Agreement to sue the Canadian Quebec government for $250 million because it responded to community concerns and conducted an environment review of shale gas mining. So this potentially could apply to state governments here in Australia. Not having an investor-state dispute settlement clause did not stop a Labor government negotiating a trade agreement with Malaysia, it did not stop a Liberal government from entering one with Japan, and it should not have been allowed through the door here.

I also note, in closing, that Labor also has concerns about the treaty's provisions on intellectual property and that the opposition will determine its position concerning any changes to the Copyright Act when the details of that are made public.

Matt Williams (Hindmarsh, Liberal Party) Share this | Link to this | Hansard source

I note with interest the member for Wills started off his discussion by talking about jobs. He would be interested to know—and I am sure he does acknowledge—that the Korea-Australia Free Trade Agreement is very positive for the jobs of young Australians and Australians in general. In terms of export companies, around 1,700 jobs are expected to be created by the benefits of this agreement—and 15,000 in total. It will be pleasing to hear the member for Wills acknowledge that at some time.

To return to the context, the coalition is always for jobs and a better economy, and free trade agreements are pivotal to that. One in five jobs in Australia is linked to trade. Completing two agreements with our major trading partners in Asia is only going to provide more opportunity for our local exporters and also our service providers who are looking to do more business in Asia, a fast-growing area. In terms of Asia being a fast-growing area, we all have heard for many years about the Asian century, and it is timely that Australia start to take maximum advantage of the growth in Asia and the Asian century.

I was lucky enough to participate in a boardroom discussion last week that was hosted by the ANZ Bank. I thank Jane Yule, from ANZ in Adelaide, for helping facilitate that discussion, as well as the University of Adelaide who put on a most fascinating presentation with ANZ. There were some really useful insights as to what is happening in Asia. In particular, their focus was on China. We all know the exciting growth coming out of China. Australia is benefiting from that now and will hopefully benefit more in the future, whether it be goods or services. In terms of services, the University of Adelaide—like other universities around Australia and the University of South Australia and Flinders University in my home state—has captured a good percentage of Asian students looking to study abroad. The figure is around 7,000 and, naturally, a number of them come from Korea.

South Korea, as we know, is an important part of Asia and the future growth of Asia. That is why this trade agreement is such a great result. As I mentioned earlier, the Korean free trade agreement, once in force, will create at least 15,000 jobs between 2015 and 2023 and add $650 million to the economy annually. Our agricultural producers will benefit strongly from this agreement with tariffs being eliminated for Australian raw sugar, wheat, wine and horticulture. Total services exported, comprising mostly education and recreational travel related services, are valued at $1.8 billion. There are numerous benefits from this free trade agreement across so many important growth sectors of our economy. We know that we can compete internationally, that we have first-class services and, importantly, that there is a demand for those services.

Korea is currently Australia's third-largest export market and our fourth-largest trading partner. It is significant to Australia and this is why this agreement is so beneficial for us. As I said, this agreement will be good for not just exporters but also importers, workers, consumers and investors in opening up markets and freeing trade and investment between Australia and Korea. There will be tangible benefits across the whole of the Australian economy and society.

The agreement secures Australia's competitive position in this major market where our competitors such as the US, the European Union and the ASEAN countries are already enjoying preferential access. It is a great result, along with the Japan free trade agreement and other agreements entered into over many years in Asia, including with Singapore. We are slowly putting together this puzzle. Andrew Robb is doing a great job of negotiating a potential free trade agreement with China in the near future.

When we look at free trade agreements it is always important to consider the implications of not acting and not negotiating such agreements. If we did not proceed with the FTA, our exports to Korea would be five per cent lower by the time the US and the EU's agreements are fully implemented in 2030. Korean imports of Australian agricultural goods would decline by 29 per cent by 2030 and our mining and manufacturing exports would decline by one and seven per cent respectively. My good friend the member for O'Connor has just joined us in the chamber. Agriculture is an important sector for his seat, for his state and throughout Australia.

After 15 years of the FTA's operation, by 2030, our exports to Korea will be 25 per cent higher than they otherwise would have been. This is a significant contribution that we might not have taken advantage of if we were not entering into this FTA. By 2030, exports of agricultural goods to Korea will be 73 per cent higher than they otherwise would have been, contributing to an increase of five per cent in Australia's total agricultural exports. We all know that we have great expertise and a competitive advantage in agriculture and mining. Mining exports to Korea will be 17 per cent higher and manufacturing exports will be 53 per cent higher—a great result for our manufacturers who are still manufacturing some world-class products in Australia. Overall, in terms of exporters, the FTA would create around 1,700 new jobs on implementation.

The Korea-Australia Free Trade Agreement will also promote increased investment. I just want to say a few words about this too, because this is something that should not be overlooked. Korea's total investment in Australia was worth $12 billion at the end of 2012 and this will only increase as a result of this agreement. Under the KAFTA, Australia has retained the ability to screen investments in sensitive sectors, including media, telecommunications and defence related industries at lower levels, and this is important in terms of safeguarding some of our expertise and what we currently do in some areas. It also reserves policy space to screen proposals for foreign investment in agriculture—land at $15 million and agribusiness at $53 million. These are important safeguards that the Australian public would be interested in knowing and understanding.

I just want to say a bit more about agriculture, given its importance. It will make a significant difference at the farm gate. From mango exporters, to macadamia nut growers, to potato farmers, Australia will enjoy improved acres to the Korean market. With potato farmers, there are some big ones in my state of South Australia—Mondello Farmsis one that comes to mind. They would be very happy if they look at export opportunities going forward.

Tariffs of up to 300 per cent will be eliminated on key Australian agricultural exports including beef, wheat, sugar, dairy, wine, horticulture and seafood. Again, some of these areas of agriculture, like seafood, are in great demand in Asia. We have some of the best seafood in the world, so this will be of vital importance to improving our exports in some of these sectors.

Onto a favourite subject of mine—wine—coming from South Australia: needless to say, a great wine state. We are currently subject to tariffs of 15 per cent, but wine from the US, EU and Chile enter duty free. Some of our major competitors around the world have duty-free wine going into Korea. That will now change with the FTA, where they will be 30 per cent lower than in 2007—a significant change for those in the wine sector. This is not only the wineries but also the suppliers that are so important in so many of these sectors, like the label manufacturers. Collotype Labels, just on the border of my electorate, have always been a leader in wine labelling and they will be happy if some of their customers are selling more wine into the Korean market. Printers—and there are many fine printers in my electorate of Hindmarsh—again, those that are involved in printing of a whole lot of things connected to the sector. Bottlers too: there is a bottling plant which manufactures wine bottles on the edge of my electorate. Again, they will be happy if their customers are selling more into Korea as part of this agreement.

I wanted to cover off briefly on services, because I have worked in accounting firms and law firms in the past and I know they will be beneficiaries of this agreement. For example, the agreement will allow Australian law firms access for the first time to Korea's legal consulting services market by permitting Australian firms to establish representative offices in Korea and Australian lawyers to advise on Australian and public international law. In terms of accounting firms, likewise, they will be able to establish offices and provide consulting services.

This is a new opportunity for some of Australia's best professional services firms. A former colleague of mine is actually in Canberra today on a matter, Tim O'Callaghan, who is the new head of the Adelaide office for Piper Alderman—and I congratulate Tim on his appointment. I know he is always looking at new opportunities so I am sure something like this might be of interest to Tim and Piper Alderman, among other firms.

In other areas: the audiovisual co-production agreement will deliver new commercial opportunities for our creative industries, with an audiovisual co-production agreement facilitating film and television collaboration. In Adelaide there is a firm in particular, Rising Sun Pictures, that does some great work in the audiovisual space. They might be interested in where they could go with this agreement, as would Kojo, another company in a similar space. Finally I want to touch on energy and resources. Under KAFTA, Korea will eliminate tariffs for all resources and products over 10 years. Some of the resource industries that will benefit from KAFTA include petroleum, natural gas—so Santos and Beach Energy, two of the great gas producing companies in Australia, will be great beneficiaries—and gold.

I congratulate Andrew Robb and his team on the fantastic work they have done with this free trade agreement with South Korea, as well as the other work they have done with Japan and their ongoing work with China. As we know, the growth from the middle class creates great opportunities, great chances, for Australian exporters and service companies to expand internationally. We are a small market so we have to take advantage of these international opportunities where there is this growth. I am sure my South Australian federal colleague over there, the member for Makin, will be most pleased that our state—whether it be in relation to wine, resources or agriculture—can benefit from this great work by the government in delivering free trade agreements. We cannot forget that there are some benefits as well for Australian business, whether it be IP or government procurement, in the whole equation. Australian suppliers will be allowed access to the Korean government procurement market, and with IP we are making sure that Australian innovators and creative industries enjoy higher levels of protection—so important for them when they enter new markets. This is a great result for Australia, a great result for Australian exporters and companies, and we look forward to the results being achieved.

Tony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | Link to this | Hansard source

This legislation deals with tariff changes that form part of the Korea-Australia Free Trade Agreement. Those tariff changes are critical to the agreement and are matters that both sides of politics have been pursuing for some time. Whilst I note that the government takes credit for having delivered this agreement, the truth of the matter is that most of the groundwork for it was done by the previous Labor government. The work was led for much of that time by the former member for Rankin, Craig Emerson, in a process which I understand began in 2009. So there had been already some four-plus years of negotiations and work carried out by the former government. Nevertheless, the current government did finally sign off on it.

I understand the agreement was not concluded by the previous government because there were matters within it that were simply not acceptable to the government. But they are, from all accounts and judging by the fact that this government has signed the agreement, acceptable to the current government. I believe those components of the agreement that were not acceptable to the previous Labor government are still not acceptable to many people throughout Australia—they are certainly not acceptable to me—and that is why Labor is putting forward some amendments to this legislation. It is my view that the Abbott government has been prepared to sell Australia short in order to rush the agreement through and chalk up a so-called win.

With all agreements there are winners and there are losers, and that is very much the case with the Korea-Australia Free Trade Agreement. The government and the Minister for Trade and Investment have been very quick to talk up the benefits of the agreement but have been silent on the downside of the agreement and silent about those sectors of the community that will either lose out or get absolutely nothing. It is expected that the net effect of this agreement will be that Australia will be a minuscule .04 per cent of GDP better off after 15 years. It does not give me much confidence looking at that figure, if it is projected correctly, that this agreement will make a lot of difference to the future of Australia one way or the other. Indeed, the aspects of it that concern me may well make a difference in a negative way for the future of our country.

Claims of significant benefits to Australia were also made about other free trade agreements in the past at the time that those agreements were entered into. Years later, there is no clear evidence that any of those agreements have resulted in a net benefit to Australia. In fact, there are suggestions that in some cases we are worse off because of them. It is a matter that I believe ought to be properly investigated because it is a matter of national interest. I therefore believe that this agreement and any future agreements should be subject to a much more thorough and independent net benefit analysis before they are agreed to. It seems that, whilst Australia enters into agreements in good faith and then honours the intent of those agreements, the same cannot always be said of all other parties, who, if it suits their purpose, find alternative mechanisms to continue to place import barriers on Australian products. We have seen that with regard to the agreement with Thailand and the ability of Australia to export cars to that country. The tariffs may not have changed, but other criteria in turn put barriers on exports to that country were introduced by that country.

Bilateral agreements can, in my view, also lead to backdoor methods of getting goods into a country, usually via a third country. In a globalised world where multinationals operate from several countries, that is becoming increasingly difficult to police. It is a matter that we have been grappling with in one of the committees of this parliament with regard to food labelling. It also seems to me that free trade agreements are often driven by a specific industry sector that lobbies very well—I will give them credit for that—and are prepared to advance their own interests at the expense of other industry sectors.

Free trade agreements also result in what some have referred to as a race to the bottom, where countries compete against each other in order to increase market access. Of course, a better outcome would be to work through the World Trade Organisation and have all countries deal with each other in an even-handed way. But I understand how difficult that is to achieve when individual countries want to establish a competitive advantage. There is also a fundamental difference between free trade and fair trade; and, regrettably, free trade agreements do not necessarily result in fair trade.

It is interesting that we are debating this legislation when, under Australian arrangements, free trade agreements can be entered into by the government of the day without the approval of parliament. I see no justification for that. The process is, in my view, wrong, and all free trade agreements should be subject to parliamentary approval before they are signed off. It should not be simply those sections of the agreement that require legislative change such as that which this legislation deals with. In fact it is not the case in all other countries that agreements are entered into by the government of the day without reference to their parliaments, so I see no reason why that could also not be the case in Australia. Indeed, when I look at how this process began—where Australian governments have been able to enter into agreements without having them signed off by parliament—it seems a little grey to me where the authority for the government to do that actually lies. But, nevertheless, that is the way it is, and my view is that that in itself is a matter that should be reviewed by the parliament.

I note that the inclusion of the investor-state dispute settlement provisions are not subject to parliamentary debate or approval, but I nevertheless make it clear that I do not support the inclusion of ISDS clauses in free trade agreements. I commend my colleague and friend the member for Wills, who spoke at length about this in his contribution to this debate just a moment ago. As paragraph 4.12 of report 142 of the Joint Standing Committee on Treaties reveals that, as of April this year, there were 568 known ISDS cases worldwide, of which '43 per cent were decided in favour of the state and 31 per cent in favour of the investor with approximately 26 per cent settled out of court.'

ISDS gives additional special rights to foreign investors that enable them to sue governments for damages in an international tribunal if they can show that a change in domestic policy has harmed their investment. ISDS clauses provide greater rights and protections to overseas companies than the rights offered to Australian enterprises. That is discriminatory and wrong and, as evidence clearly shows, is proving to be bad, costly policy. Nor are my concerns about ISDS eased by the so-called protections written into the Korea-Australia Free Trade Agreement, because the reality is that, whenever a matter goes to court, it is never black and white. It always becomes complicated. There are always arguments that are difficult to clearly define and ultimately they are determined by whoever sits on the bench at the time.

Interestingly, the Howard government did not include ISDS provisions in the US-Australia Free Trade Agreement in 2010 and the Productivity Commission found that there were no economic benefits from ISDS and no evidence of market failure resulting from political risk to foreign investors. I repeat that: there was no evidence that, by not having ISDS provisions in one of these agreements, it changed at all the investment by other countries in Australia.

Equally concerning is the fact that the ISDS proceedings are not public, there is no independent judiciary and there is no system of precedents or appeals. Not surprisingly, I note that countries around the world are now rejecting ISDS provisions and walking away from them. That does not surprise me at all because—and the member for Wills quite correctly pointed out some of the cases—it is simple to see that what governments are simply doing is putting at risk their sovereignty.

Labour mobility is also a matter of concern to me and many people I have spoken with about the Korea-Australia Free Trade Agreement. The concern is that the agreement may provide easy access for Korean workers to come to Australia and take jobs at the expense of Australians looking for work. The government has already taken steps to make it easier for foreign workers to take up Australian jobs by easing restrictions in respect of 457 visas, but I understand that provisions within this agreement may make it even easier for foreign workers to come to Australia from Korea because of the easing of what we refer to as labour market testing provisions. In fact, I am not even sure that they will apply at all if this agreement comes into effect. That in turn means that there is no security when Australians are competing for jobs with people from Korea. It makes sense that Korean businesses setting up here might want to bring their own workers over, but that is not in Australia's interest. The whole intent of having investment in Australia is because it generates productivity and jobs here in this country for Australians.

I note that the Australian government is right now negotiating a free trade agreement with China. I hope and trust that this Korean agreement does not form the template for the agreement with China. Our trade relationship with China is indeed very strong and I expect that any concerns that arise from this agreement, particularly the concerns relating to labour mobility and to the ISDS provisions, would be magnified if they also formed part of an agreement with China.

Whilst none of us have a crystal ball and circumstances may change in the future, the current economic modelling predicts that as a result of this agreement there will be job losses in the textile, clothing and footwear industries as there will be in wood, paper products, chemicals, rubber, plastics, motor vehicles, metal products, electronic equipment and manufacturing more broadly. Indeed, my recollection is that the car makers cited free trade agreements as contributing to their exit from Australia when making their announcements to end manufacturing here. My concern is that the Korea-Australia Free Trade Agreement will hasten the wind down of the Australian automotive sector. I note that there is already talk in my home state of that occurring. I note that only last week there was an announcement that 300 workers at the GMH plant in Elizabeth will be made redundant earlier than previously expected.

This kind of agreement, in my view, will hasten the closure of the car-making industry in Australia. My concern about that is compounded by two factors. Firstly, the Abbott government has made very little provision to assist workers who lose their jobs as a result of car making this country. We are talking about possibly up to 50,000 people across the country who are directly affected, and maybe another 200,000 that are indirectly affected. I am not prepared to say whether the total quantum of jobs is going to be specifically this much or that much, but we do know that it is going to run into the tens of thousands and the government has put on the table a miserable $100 million to assist. At the same time, I understand that the money has been put on the table in a way that makes it very difficult and unattractive for anyone affected to access it. In fact, the money that been put on the table is of little use to those people who are going to be made redundant.

Compounding that, we now have a situation where the government is likely to walk away in a substantial way from naval shipbuilding for our Defence forces in this country. Again, particularly for South Australia, that is a critical matter, because it was the building of naval ships and submarines that offered some hope and provided some light at the end of the tunnel for those people who are likely to be made redundant from the end of car making at Elizabeth—so that they could go into a different sector to continue employment. These are matters that truly concern me.

Rick Wilson (O'Connor, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak in support of the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014, and to highlight some of the tremendous opportunities that this agreement presents for the farmers, fishermen and miners of my electorate of O'Connor.

Past policies of high tariff protection for our manufacturing industries have generally disadvantaged our primary production sector, which has borne the brunt of restricted access to key markets across the globe. The move to reduce tariff protection, begun by the Hawke government in the mid-1980s—which, I hasten to add, had the full cooperation of the coalition—has transformed our economy, allowing efficient industries to thrive and prosper while those unable to compete on the global stage have fallen by the wayside.

Unfortunately, many previous trade liberalisation agreements have focused on manufactured products, with many of our trading partners choosing to protect their domestic primary industries. As we all know, Australian farmers and miners are the best in the world and have long waited for the opportunity to compete on a level playing field, particularly into our key Asian markets. The bill before us today represents a major breakthrough, especially for farmers, horticulturalists and viticulturists across my electorate.

While I will outline in detail the specific tariff reductions and how they will benefit producers, it would be remiss of me not to mention the father of the free trade movement, the former member for Wakefield, known universally and affectionately as 'the modest member', Charles Robert—Bert—Kelly.

Bert Kelly was the strongest advocate in the federal parliament during the 1960s and 1970s for the principles of free trade, particularly lower tariffs, reduced government regulation and increased economic liberalism. This was an era of strong protectionist policies, and Bert Kelly was almost a lone voice, with occasional support from predominantly Western Australian farmers and miners. One of those Western Australian farmers was John Hyde, the member for Moore between 1974 and 1983, who is still active today promoting dry economic policies—an expression he coined and made his own.

In his foreword to the book The Modest Member: the life and times of Bert Kelly, John says that Bert Kelly used the opportunities afforded by his office to win public opinion for economic management that was efficient, mindful of the future and which did not give a privileged few the capacity to raise prices above competitive levels at the expense of many. That is a fine set of principles for any member of this place live by. In a happy coincidence, one of Bert Kelly's three sons, Tony, and his wife, Dawn, farm at Mount Barker in my electorate. I am sure that they and many other farmers, horticulturalists and viticulturists will finally enjoy the benefits of this KAFTA as well as other free trade agreements that are, in part, Bert Kelly's legacy to us all. I am certain that Bert would have been very proud of the tireless efforts by Minister Andrew Robb and the staff of the Department of Foreign Affairs and Trade in securing this agreement, which will substantially liberalise Australia's trade with South Korea.

Formal discussions between our two governments began in 2009 and concluded in May 2014, when the Korea-Australia Free Trade Agreement was tabled in parliament after signing by the Hon. Andrew Robb and his South Korean counterpart, the Minister for Trade, Industry and Energy, Mr Yoon Sang-jick, on 8 April 2014 in Seoul, South Korea. The governments of both Australia and Korea aim for this agreement to enter into force in 2014.

Korea is currently Australia's third largest export market and our fourth largest trading partner. The implementation of this agreement will significantly boost Australia's position in this major market, where other competitors already have preferential access. The United States, the European Union and the Association of Southeast Asian Nations are already benefiting from their respective FTAs with Korea, and Chile, Canada and New Zealand are close to concluding their own agreements.

Goods liberalisation alone is estimated to be worth nearly $5 billion in additional GDP to Australia between 2015 and 2030. On entering into force, 84 per cent of Australia's exports, by value, to South Korea will enter duty-free, rising to 99.8 per cent on full implementation of KAFTA. This agreement contains simplified and trade-facilitative rules of origin and related documentary requirements. Goods imported into Australia that meet the rules of origin implemented through this bill will be entitled to claim preferential tariff treatment in accordance with the agreement. The amendments include relevant obligations on Australian producers and exporters wanting to export Australian goods and to obtain preferential treatment for those goods in South Korea. This agreement reflects Australia's close bilateral economic relations with South Korea.

My electorate of O'Connor stands to benefit tremendously from the proposed tariff reductions and, in many cases, the complete elimination of customs duty on many of the agricultural products and mineral resources we export to Korea. Likewise, business in O'Connor will realise substantial cost savings on certain imported Korean products vital to our mining and agricultural sectors such as heavy machinery, diesel motor vehicles and tyres. My constituents throughout the electorate stand to benefit from more affordable Korean imports such as telephones, televisions and computer monitors, tyres, motor vehicles and refined petroleum.

With respect to exports, O'Connor is blessed with an incredible mineral wealth. Our iron ore, nickel and gold exports make up a substantial proportion of the $16 billion worth of energy and mineral products Australia exports to Korea. Whilst a large proportion of these mineral resources already enter Korea duty-free, there persists a tariff of up to eight per cent on some resources including gold. KAFTA will result in the elimination of the remaining tariffs on all resource products over the next 10 years.

My electorate of O'Connor is also one of Australia's largest agricultural electorates, producing cattle and sheep for the live and chilled meat export trade as well as cereal, oil seeds, premium wine and horticultural produce. On full implementation of KAFTA, 99.8 per cent of all Australian agricultural exports to Korea will have no tariffs. Tariffs of up to 300 per cent will be eliminated on key agricultural produce such as beef, wheat, dairy, horticultural produce, seafood and wine.

Although Australia's beef exports to Korea already account for a further $640 million in export earnings—and we are the largest supplier of beef into this market—our main competitor, the United States, has a 5.5 per cent advantage due to its 2012 free trade agreement with Korea. When enforced, KAFTA will eliminate the current 40 per cent tariff on Australian beef, 18 per cent tariff on offal and 72 per cent tariff on processed beef products over the next 15 years. This is great news for beef producers in my electorate, who have already seen increasing demand following this year's announcement of a $1 billion contract between chilled meat producers V&V Walsh and China.

Roger Fletcher, owner of the Fletcher International meat-processing plant in Narrikup and exporter of chilled meat, believes that the growing sheep meat industry in Korea can only benefit from the elimination of these tariffs. As a sheep producer myself, it is heartening to see that the 22.5 per cent tariff on lamb will be eliminated over the next 10 years. The tariff on pork, which is currently 22.5 to 25 per cent, will be eliminated over five to 15 years. O'Connor's small but significant dairy industry also stands to benefit from growing duty-free dairy quotas as well as the elimination of high tariffs on cheese, which is currently 36 per cent, and butter, 89 per cent, over 13 to 20 years.

With respect to fisheries, the southern rock lobster industry based on the south coast of my electorate will benefit from the elimination of rock lobster tariffs of 20 per cent over the next three years. O'Connor is also a productive grain-growing region, with our Wheatbelt, Esperance and Great Southern regions producing over 50 per cent of Western Australia's wheat, barley, oats and canola. Korea will eliminate its 1.8 per cent tariff on wheat and eight per cent tariff on wheat gluten immediately the KAFTA enters into force. Korea will also provide a growing duty-free quota for malt, and malt and barley, and over the next 15 years they will eliminate their high out-of-quota tariffs of 269 per cent and 513 per cent respectively. Tariffs on canola oil, currently at eight to 30 per cent, will be eliminated over five to 15 years.

The horticultural food bowl of my electorate surrounds the town of Manjimup and produces a large variety of fruit and vegetables for export. Many of these horticultural products will enter Korea duty-free on entry into force of KAFTA. Tariffs on premium produce such as asparagus, which can be as high as 54 per cent, will be gradually phased out over three to 10 years. Counter-seasonal demand will result in the high tariffs on produce such as chipping potatoes of up to 304 per cent being eliminated during their off-season, which coincides with our export season. WA produces some of the cleanest disease- and residue-free potatoes in Australia, which are very much in demand overseas. Potato growers in the Pemberton area, such as Dom Della-Vedova and his neighbour Bendotti Exporters, who process potatoes grown for export, stand to benefit tremendously from any tariff relief.

The farmers of my electorate are not alone in their support for the KAFTA. The National Farmers' Federation view is:

… that the agreement will provide millions of dollars in export value to Australian farmers, including those in the red meat, grains, dairy, sugar, pork and horticulture sectors. The agreement recognises agriculture as one of the nation's export strengths and will open opportunities for the sector in Korea.

The wine-growing regions in the Great Southern—Frankland, Mount Barker and Cranbrook—and Pemberton are currently subjected to a tariff of 15 per cent on all sparkling, white and red wines, whilst their Chilean, American and European counterparts enter Korea duty-free. On the entry of KAFTA into force, Korea will immediately eliminate all tariffs on imported Australian wines. I would hope that this would lead to an immediate rallying of our wine industry, which has seen a decline of wine exports into Korea of more than 30 per cent since 2007. One of my constituents, Kim Tyrer of Galafrey Wines in Mount Barker, currently exports premium wines to China and names Korea as a perfect market for their particular calibre of wine. The hip, young, educated Korean apparently loves cool-climate red wine, and tariff elimination will even the playing field with major players like the US, the EU and Chile.

When it comes to imports, up to 86 per cent of our current imports from Korea will enter Australia duty-free when the KAFTA enters into force, and this will increase to 100 per cent within eight years. For O'Connor, this means immediate tariff removal on some types of agricultural and mining equipment which are currently subject to an import duty of four per cent to five per cent. Australia wide, small to medium size petrol vehicles and medium size diesel powered off-road vehicles will have their five per cent tariff abolished on entry into force of the KAFTA. Larger petrol passenger and off-road motor vehicles, as well as larger diesel-fuelled vehicles, will have their four to five per cent tariff gradually reduced over three years. Importation of new tyres will be subject to immediate removal of the five per cent tariff, while retread tyres will have their five per cent tariff eliminated in five equal annual stages.

Independent modelling suggests that the Korean agreement will be worth $5 billion in additional income to Australia over the next 15 years, after which it will provide an annual boost to the economy of $653 million per annum. By 2030, agricultural exports to Korea are projected to be 73 per cent higher than without the free trade agreement. Mining exports will be 17 per cent higher than otherwise, and it is projected that KAFTA will create over 15,000 jobs between 2015 and 2030. For my electorate, these are all huge gains that everyone in O'Connor should be able to reap some benefit from.

Finally, I would like to reiterate my earlier thanks and congratulations to Minister Andrew Robb and the hardworking staff at the Department of Foreign Affairs and Trade for their tireless efforts in bringing this Australian free trade agreement to a conclusion. I commend the bill to the House.

Ms CHESTERS (Bendigo) (12:34): I thought it was important to rise and speak on the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014 and put on the record some of the concerns that I have with this free trade agreement. There are some good things about the KAFTA. It will give Australian exporters an increased access to Korean markets, and it will help maintain Australia's competitiveness with the United States, the European Union and other nations in the Korean market. It will especially benefit Australian agricultural industries and offer other significant potential benefits to other service sectors. Modelling shows that it will boost Australia's exports to Korea by $3.5 billion by 2030. In particular, it will boost Australia's beef exports to Korea by 59 per cent, a figure that almost every speaker has highlighted in this House. It is believed that it will create an additional 1,745 jobs by 2015. The agricultural sector will stand to benefit by the inclusion of beef, sugar, dairy, wheat, wine and horticulture. These sectors employ more than 200,000 workers in Australia, including close to 4,000 in production in my electorate and about 6,000 in total in the central Victoria and Bendigo region when you put agricultural production together with the agricultural sector.

But my question is: when we create these jobs, who will actually be working them? There is a need not just within this free trade agreement but within government policy to look at building workforce participation of locals in these industries. We are actually in a crisis when it comes to creating jobs in our country areas, and I do not believe that this free trade agreement alone will give those people the working opportunities. For all the talk of jobs that we are creating, it is about who will work those jobs. The reason why I do not believe that those jobs will go to locals is the current employment practices going on in our production and manufacturing facilities already.

I will just give a few examples from my own electorate about how jobs that are being created are not going to the locals or to the permanent residents. KR Castlemaine—for everyone who likes their Dons and likes the KR Castlemaine bacon—employ about 1,500 workers. Most of them are local, but their seasonal work that is coming up will be entirely sourced by tourist working holiday visas. That is about 70 jobs that will not go to locals. Hazeldene's chicken factory, another big employer in food production in my electorate, has at least 200 boners that are on some form of visa arrangement, whether it be 457, a tourist visa, a protection visa or an international student visa—again, 200 jobs that are not going to permanent residents or locals. The last one I wish to highlight is Hardwicks, which is a beef and lamb slaughterhouse and a food producer. They have about 200 employees and on a recent site visit there I met 40, which is quite a significant chunk of their workforce, who were on tourist working visas, people who were over here on a working holiday—again, jobs going not to locals but to people recruited overseas by employment agencies and brought into Australia. Quite often, they are paid the award or worse, so undercutting the wages and the conditions of those locals employed in that facility.

My concern, and what I strongly encourage the government to do, is to ensure that in this agreement, in future agreements and in government policy we are encouraging development of a local workforce to take up job opportunities that may be created by free trade agreements. I believe that the government should have secured a better deal with Korea that picks up some of these very issues. I believe that KAFTA should not include the investor-state dispute settlement provisions, and many people on this side of the House have serious reservations about this inclusion within KAFTA. This provision gives Korean firms greater legal rights than Australian firms. Labor remains opposed to the inclusion of these provisions. In government, we will seek to renegotiate with Korea the removal of these provisions, ensuring that there is a fairer trade agreement with Korea.

Government should also require employers to show that there are skill shortages through the labour market testing provision if they wish to utilise the KAFTA provisions on labour mobility. This links back to the issue that I have just raised about who will be working these new jobs that potentially will be created as a result of the KAFTA agreement. This agreement is in danger of creating a net job loss if we do not address labour and employment conditions within the agricultural sector, as well as in other sectors. And why I say a massive net job loss is that if we are not creating good jobs that you can count on in the agricultural sector, if those jobs are actually being taken up by people on a tourist visa, on a 457 visa, on an international student visa and, at the same time, accelerating the job losses in the manufacturing sector, then we will actually see a massive net job loss in this country.

We have to ensure that the industry is ready to employ locals, which means we need government to be investing in that skills development, which means government needs to be making sure that we have locals ready to work. But it also means ensuring that we require employers to show that there is a skill shortage in their labour market. Quite frankly, the current provisions around that are just not strong enough.

In my electorate, from where I have used some examples, we have hit youth unemployment of 30 per cent. That is one in three young people. I doubt very much that every one of those young people has been asked if they want a job at KR Castlemaine, if they want a job at Hardwicks or if they want a job at Hazeldeans. I doubt very much that those people have been asked if they would like the opportunity to work in those facilities. That is part of the problem with this agreement.

I agree with the CFMEU's position that no 457 visa concessions should be included in this free trade agreement or in any free trade agreement. Australia's temporary visa program should not even be on the negotiating table when it comes to free trade agreements. These are domestic policy matters for the Australian parliament, in consultation with Australian industry and Australian workers.

The inclusion of this in the area of labour mobility, which is the clause that I am referring to, could open up the 457 visa program to Koreans. And we are not talking about small numbers of Koreans already working in Australia on the 457 visa system. Data shows that, as of 31 March 2014, there were almost 2,500 Korean nationals working in Australia on 457 visas. This is up from 1,750 the previous year. So we have already had a 39 per cent increase in the 457 visa program from Korea. That is six per cent of the total 457 visa program.

These workers are quite often exploited and have very few and limited avenues to voice their opposition and the challenges that they face. For an example about how bad the 457 visa system can be, the case that jumps to mind—a hire one, get another worker free—is the case where a Filipino couple employed by a motel chain in country Victoria had their employment unexpectedly terminated this July when they were overseas. This particular couple were hired under the 457 visa program in early 2013. They were hired as residential managers but both of them worked an average of 14 hours a day over six and sometimes seven days a week. Only one of the couple received a wage and that wage was for 40 hours of ordinary work—no overtime. The other partner in the relationship received no pay at all. They currently have a claim before the Fair Work Ombudsman for $250,000 worth of back pay. When asked why they continued to work in this situation, the couple said they had to pay off their debt to the recruitment agency first, before they started to earn a dollar.

This is the kind of exploitation currently occurring under our 457 visa system. These are the loopholes; these are the problems that need to be tightened up to ensure that overseas workers are not exploited at the expense of Australian workers. Again, my question is: how hard did this hotel try to find a local worker? How hard is it in regional Victoria, where we see unemployment peaking, to find somebody who could be this manager? It is easier for employers to look for the cheaper alternative, which is to engage an employment agent and bring an overseas worker in. As I have demonstrated, they are quite often exploited. If we are going to include the weakening of the 457 visa program within our free trade agreements, we need to ensure we have a stronger and more robust system which can ensure these workers are treated properly and that, if they do have an issue, they are supported in getting that issue resolved.

As I have mentioned, the KAFTA will lead to job losses in other parts of our manufacturing sector. We have heard from previous speakers that it will speed up the closure of automotive manufacturing in Australia. One of the things that really strikes me about the government on this issue is that they are standing up and championing cheaper cars for consumers yet, when you are out there talking to people, they get how important the auto industry is and they like their Australian-made cars. These job losses will not only immediately affect our local economy by withdrawing those wages, they will also affect our skill base and our capacity to maintain high-skill jobs in the future. The KAFTA will only add pressure to an industry already struggling to survive. That is why it is so important, when we negotiate these agreements as a nation, that we think about the long-term impact. Our auto industry has high-skill, highly trained workers from the people who draft and design our autos to the people who put them together. When you lose that skill base you do not get it back. We have seen that with the textiles industry. There is now no university or TAFE that offers a pattern-making or pattern design course in Australia. They do not need to because we no longer have a textiles industry, or if we do it is quite small. We have lost that skill base yet ADA, the manufacturer in my area which still makes uniforms for our Defence personnel, is now looking overseas for a pattern maker because we have none in Australia. This is an example of the skill base we will lose in the auto industry when this agreement—this trade policy—is finally signed off.

The question of whether a particular trade policy or trade agreement is in the long-term best interest of the nation must always take into account opportunities to develop and grow jobs, but not at the expense of others. These are just some of the concerns I have with the KAFTA and I urge the government to negotiate a better deal for our country.

Jane Prentice (Ryan, Liberal Party) Share this | Link to this | Hansard source

The coalition went to the last election promising three core free trade agreements, and the Korea-Australia Free Trade Agreement is the first of those to be negotiated and completed by the government. The coalition government is securing stronger trade relations with our most prominent trading partners as part of our strategy to build a stronger economy for the benefit of all Australians. There has been a lot of confusion about these free trade agreements in the media, where some people think exports equals 'good' and imports equals 'bad'. This is not the case at all. When discussing the impact the Korea-Australia FTA will have on the economy, it is important to look at a number of factors. There are five major elements that affect the extent of changes in exports that arise from the implementation of free trade agreements and are captured in the economic models.

One, the size of the trade barrier that is removed by the FTA has a major impact on the extent to which changes occur. Removal of a tariff barrier leads to the first round impact of decreasing the price paid by importers and increasing the price received by exporters. This acts to increase demand for these products, so the removal of tariffs would be expected to increase exports and also increase production of the goods. The extent of the increase depends on the magnitude of the tariff reduction. A large reduction in tariffs resulting, for example, from the complete removal of a high tariff would lead to greater changes in exports and production than a small reduction in tariffs from the complete removal of a small tariff or a decrease of the tariff rate. A free trade agreement will not result in this first round effect on products for which there are no tariffs to be removed, or for product lines excluded from the agreement.

Two, the exporting country's initial share of imports to the importing FTA trading partner will affect the degree of change in exports. If the share is small then the relative impact of the tariff reduction will be large. For a larger share, the tariff reduction will lead to a relatively smaller change in exports.

Three, when the demand for export products changes there are flow-on impacts to other sectors of the exporting country's economy. In order to meet an increase in demand for exports of one product, resources in the exporting country are redistributed towards production of that product, but away from other products. This will lead to a decrease in production, and potentially exports, of these other products. The extent to which production of other products decreases will depend on the pattern of input use and the elasticity of demand for these products. The opposite will happen if demand for exports of a product falls.

Four, trade liberalisation will increase the income—GDP—of both trading partners. Increased income will mean that countries are able to increase consumption and increase imports from all countries. This impact will be greater for FTAs that lead to greater trade creation, and therefore greater increases in GDP. It is possible that countries outside the FTA increase exports of some products due to the increase in imports by the countries within the FTA.

Five, consumer preferences in the importing country will also determine the extent of changes in trade flows. If there is greater preference for products from the FTA trading partner compared to other countries and products, the removal of tariffs will have a greater impact on imports from that country. The importers will substitute towards products from the FTA trading partner.

There are two related scenarios that were developed and analysed for this particular project. The first scenario looked at the impact of the Korea-US and Korea-EU free trade agreements on Australia where Australia did not have a similar agreement with Korea. This scenario was aimed at understanding how trade patterns are likely to develop as Korea's free trade agreements with the US and the EU are implemented, and what it meant for Australian trade. Considering trade in goods, the Korea-US and Korea-EU free trade agreements would result in Australia's exports being diverted away from Korea to other countries. At the end of the FTA implementation period, compared to what would be without the Korea-US and Korea-EU FTAs, Australian exports to Korea were 4.7 per cent lower, as Korean importers sourced their products from US and EU exporters at lower prices. As the US and EU gained increased access to the Korean market through the implementation period and displaced Australian products, Australian exporters redirected their products to other countries but received lower prices for their goods.

Exports to other countries are higher under the FTA scenario, compared to the baseline. The total volume of exports to all countries is higher by 0.03 per cent in the FTA scenario. This is, in part, because the expansion in the US and EU demands more resources from Australia. Overall, the terms of trade decline as a result of the two FTAs, and in order for Australia to maintain the volume of total exports the value of exports declined. Real wages in turn are lower by 0.2 per cent as firms adjust to the lower income from exports.

The second scenario looked at the impact of the Australia-Korea FTA in the presence of the FTAs between Korea and the US and EU. The baseline for this scenario was the result of the first scenario where the US and EU have free trade agreements with Korea. The objective of this was to understand the benefits that would arise from a new agreement between Australia and Korea, relative to the current situation. Australia's total exports are higher with the implementation of the Australia-Korea Free Trade Agreement than would be otherwise. Australia's exports to Korea are 25 per cent higher under the FTA than they would be without it, driven by lower tariffs and greater access to the Korean market. Australian exports to other countries are slightly lower as a greater proportion of Australia's output is directed towards the more profitable Korean market and, overall, the total quantity of exports from Australia increased by 0.1 per cent of $280 million as a result of the FTA. Real wages are higher than they would have been without the FTA and as Australia's terms of trade improve as a result of the FTA.

Building stronger trading relationships in Asia is critical to Australia's economic future. Signing the Korea-Australia FTA takes Australia closer to realising our goal of finalising FTAs with our major North Asian partners, which together account for 37 per cent of Australia's overall trade and two-thirds of our total goods exported. The coalition's success in negotiating this free trade agreement shows that only the coalition is serious about sending a strong signal that Australia is indeed open for business. I commend this bill to the House.

Debate adjourned.