Graham Perrett (Moreton, Australian Labor 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 the Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014, more commonly is that KAFTA tariff bill. However, just so people understand, this is not actually a free trade agreement. It is more accurately a bilateral preferential agreement. I would turn to the fine work done by the Joint Standing Committee on Treaties—and I note that the member for Fremantle is here in the chamber with me—and note that the member for Fremantle and the member for Wills put in a dissenting report to the committee's report on this KAFTA tariff bill. It makes for very interesting reading and makes some very good points.

It is my understanding that the opposition will be supporting this agreement, but I want to draw to the attention of those listening some of the concerns that the Labor Party has with this agreement—concerns highlighted by the member for Fremantle and the member for Wills in their dissenting report.

Obviously, Labor supports implementing agreements that will create economic growth and jobs for Australians. We are the Labor Party, and we have always believed that keeping people in employment and well educated will give people a greater chance at prosperity. That is what motivated those shearers in Barcaldine to come together in the first place. We have always been about jobs. That is why the Labor Party has such are proud history of being part of the Australian story and making sure that people are employed. That is why we are, economically, the envy of the rest of the world and, historically, have always been a nation that believed in the fair go. And what is a fair go? It is really about making sure people get opportunities and get jobs.

Australia is the fourth-largest supplier of agricultural products to the Republic of Korea, accounting for around 10 per cent of the Republic of Korea's total agricultural imports. Obviously, the farming sector would be particularly keen on this KAFTA agreement. When you think of South Korea, with a population of 50 million and rising—although slowly—and a GDP of US$1.3 trillion, if we can get 10 per cent of their total agricultural imports that would be good news for the farmers of Western Australia, the farmers of Queensland and the farmers of Australia. We understand that trade is important. In 2013 Australian exports to the Republic of Korea were valued at around $1.9 billion. Hopefully, this agreement will see an improvement in that. The government report into KAFTA said that an agreement would eliminate high tariffs on a wide range of Australian exports—particularly beef, wheat, sugar, dairy, wine, horticulture and seafood. All of these are what you would call natural resource sources. If you go through those products, there is not a significant value-adding in any of those products—with all respect to the wine industry and some of those other things—but they are not high value, value-adding, I guess. They are the sorts of jobs where the higher skills are involved.

This agreement with Korea is expected to be worth about $5 billion in additional income in Australia between 2015 and 2030, and that is good. The agreement will obviously provide a boost to the Australian economy, projected at $650 million after 15 years of operation if all goes well. It is important that we compare it not just with the opportunities but also with the threats—and there are threats. The United States, who compete with us in the Korean market in many of the products—beef, wheat, sugar, dairy, wine; I am not sure about their seafood industry—there is the possibility that they would take the Australian share of the Korean market. So it is not just the opportunities that are there but the threat, if we did not have such an agreement.

In its first year of operation it is expected that the Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014, or the Korean bilateral preferential agreement, will create approximately 1,700 jobs and after this agreement is signed 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 agreement.

Whilst acknowledging the good things that come with this agreement—and we are a trading nation and we should be doing all we can to make sure that there is free trade around the world, free and fair trade around the world—obviously our preference is always to do this with all nations rather than through these bilateral agreements, but there is not a lot happening there at the moment in terms of world trade improvements.

I do have some concerns, particularly about the implications on investor-state dispute settlements provisions, some of the intellectual property provisions and, most importantly, as a member of the Labor Party, the protection and nurturing of Australian jobs. They are the three things that I wanted to highlight.

The investor-state dispute settlement clauses, or ISDSs, enables corporations or investors to sue governments if their investments are harmed by a government policy or regulation and then governments, almost as a corporate entity, can be held responsible and financially liable if the legal action is successful. There is an argument up-front that such clauses are essentially a threat to our sovereignty—a threat to Australia.

Ms Parke interjecting—

I acknowledge that there were treaties in the past negotiated by Labor governments that do have these clauses. However, not since 2011 when the Gillard government agreed, and I think the national platform of the Labor Party now reflects this, that we will never allow an investor-state dispute settlement clause in any of our treaties because of that very fact.

The member for Fremantle interjected earlier on the idea that they are a threat to our sovereignty. If you look at this around the world now, we see countries like Canada being particularly hammered and the United Kingdom, I think—the member for Fremantle? There are many cases where they are taking these countries, El Salvador, where they are being hammered. As corporations rise, as the economy of the planet becomes so much more interconnected and the significance of the nation-state is on the decline, I guess, and as the Apples and the McDonalds and those multinational corporations that spread around the planet looking for tax havens, which is their legal right, we have some interesting challenges before us. We form communities, nation-states, to benefit the people who are members of them. Corporations have a different motivation. Obviously, they are duty bound to do the right thing by their shareholders, and that is deliver a profit. We do have the Corporations Law, which has some oversight, but it is not the same as the concerns of a nation. Whether they are Liberal, National or Labor, I think I can say of nearly every single member of this parliament—certainly, 225 of them—that every decision they make is in what they believe to be the nation's interest, not in their interest.

So these investor-state dispute settlement clauses mean we could end up with a Korean company like Hyundai challenging a decision made by the Commonwealth of Australia that has been made in the national interest, saying, 'That's going to affect us,' and we end up in court. There is already a challenge taking place over our plain tobacco packaging laws.

As a member of the Labor Party I strongly believe that introducing ISDS clauses within this Customs amendment bill will undermine the democratic rights of all Australians and represents a violation of competitive neutrality when it comes to Australian businesses' ability to compete on the level playing field that we aspire to. In fact, as a nation we are so honest and fair dinkum and trustworthy that we get hoodwinked, I think, sometimes by other nations that are not as committed to that level playing field. So these clauses can hamper a nation-state's ability to make a decision that is in the national interest. It is, as I said, part of the Labor Party platform that we stand by Australian jobs, and we make our position very clear on this particular ISDS provision.

Obviously, we are in opposition so we do not get sign off on treaties. We do not get to make decisions from opposition. But I do urge caution with this clause, and I think there should be particular focus on this by the government when it comes to negotiating other such agreements. The government are the world's worst card players when it comes to negotiating treaties. They have already flagged with China that there will be an agreement within a certain time—not a great approach to negotiating a treaty. Some might argue that the Chinese are the world's greatest card players, and the government have already said, 'These are the cards we're holding.' That is going to make for an interesting process in the months ahead.

Evidence shows when you look around the world that many governments are critiquing these ISDSs because transnational investors have lodged and won more cases and been awarded huge damages over health and environmental legislation—legislation that is made in the nation's interest but that affects the corporations. Governments in significant economies in Europe, South America, Africa, the Indian subcontinent and Asia have reviewed and/or renounced ISDS on the grounds that it undermines their legitimate democratic legislation. There is widespread concern about the tobacco companies' use of ISDS to undermine national public health measures to regulate tobacco advertising. In a laissez-faire, uncontrolled world, corporations can sell tobacco; but, obviously, when you make decisions in the interest of a nation, you put curbs on tobacco sales. This is a classic praxis, I guess, this intersection between the interests of a corporation and the interests of the people who live in a nation.

In 2011, the Labor government introduced groundbreaking plain packaging laws to combat tobacco consumption and in turn reduce the immense impact on the Australian healthcare system from tobacco related diseases, costs that were not being borne by the people selling the product—a legal product, I admit. That legislation was a world first. I think there was bipartisan support for the plain tobacco packaging legislation; I am not quite sure about that. There was? Yes.

But then, within a few months, the tobacco giant Philip Morris Asia Ltd, the Asian arm of the American tobacco producer, took the Australian government to the international Permanent Court of Arbitration using the ISDS mechanism embedded in Australia's bilateral investment treaty with Hong Kong. So Philip Morris Asia is using the provisions in a 1993 investment agreement to challenge the plain tobacco packaging legislation in the courts and to seek compensation, arguing that the Australian parliament's policy undermined the value of its investment by appropriating its trademarks and its branding—appropriating the company's property, if you like.

Monique Goyens, Director General of the European Consumer Organisation and lawyer of 30 years has stated that there is no need for additional legal mechanism to deal with disputes that could be resolved through routine court action. The ISDS clause offers greater legal rights to foreign businesses than those available to domestic businesses, so putting Australian businesses further behind. Labor does not support provisions that would constrain the ability of the government to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses.

As I said before, I do agree that there were previous treaties by Labor governments that actually had these ISDS clauses. But these are all serious issues that, if handled poorly, could have an adverse consequences for Australia's sovereignty, our economy and our legal system as well as for the intellectual property providers, consumers and unemployed Australians.

Labor also has concerns about the expansion of intellectual property rights which would extend monopoly patent rights to charge higher prices and give copyright holders greater rights at the expense of consumers, particularly Australians. Labor has concerns about KAFTA's provisions on intellectual property and obviously we will determine our position on any changes to the Copyright Act when that debate comes on later.

I also have concerns about the changes to advertising for labour. Obviously, modern Labor, whilst it came out of a protectionist party back in the 1890s, champion free trade. If you look at our history from Curtin, to Forde to Chifley—not much time with Forde, obviously, but I must mention him because he is a Queenslander—to Whitlam, Hawke and Keating, we started protectionist but then we became much more committed to trade. Labor believes the government should require employers show that there are fair dinkum skill shortages if they wish to utilise KAFTA's provisions on the movement of people and do so in a fair dinkum way; otherwise we will be swamped by skilled workers coming from Korea.(Time expired)

Stephen Jones (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | Link to this | Hansard source

Five years after the end of the Second World War the Korean peninsula was again thrust into a very bitter war. Hundreds of thousands of lives were lost, hundreds of thousands more were thrown into turmoil and for three years the Korean people were facing war on their soil. I use this story is an introduction to a discussion on the Korea-Australia Free Trade Agreement to make this point: in my lifetime South Korea has gone from a position of being a net recipient of aid from the rest of the world to being a net donor of aid to other countries within the region. There are many reasons for this: obviously a robust democracy, a lot of work has gone into the modernisation of its economy, a lot of cooperation between the private sector and the government sector, and obviously intense interest and assistance from the rest of the world to ensure that South Korea was able to get back on its feet. We are now in the happy position of having a very good diplomatic and trade relationship with South Korea as a democracy within the region. This trade agreement takes that relationship to another level.

We support free trade and we support the trade agreement with Korea, but, as my friend the member for Moreton has said in his contribution to this debate, there are some reservations. Were Labor still in government and if we had the opportunity to complete the work that we started in 2009, we would have concluded an agreement, but there would have been some differences—and I will go to those shortly.

The Republic of South Korea is our third-largest export market. This bilateral trade agreement presents significant opportunities for Australian exporters and for Australian workers. It is not without its downside. Any trade agreement involves trade-offs and often they felt within particular parts of the economy and particular regions around the country. They are felt within regions such as mine, a region that has traditionally gained its employment and its wealth from a mixture of manufacturing, mining and other services. When we reach agreements such as this, there is no doubt that it adds further pressure to those manufacturers who are competing against nations such as South Korea and others in an open market.

But I will say this. Over the time that I have lived and grown up in my region, the exports that we have focused on as a part of our regional economy have changed. It would surprise many to know that one of the biggest export earners in the Illawarra today is now the University of Wollongong, which has an enormous offering of undergraduate and postgraduate courses and an extremely strong foreign student coterie within its student numbers. It is incredibly important to the local economy. It does not replace the traditional industries such as mining and manufacturing, but it does go to show that the balance of exports and the shape of those exports, even in a region such as mine, has changed over my short lifetime.

The Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014 is a part of what I understand to be largely a bipartisan approach to the issue of trade and trade agreements. As many speakers have said in this debate, we made a turning point when it came to trade in this country, first in the 1970s under the leadership of Gough Whitlam and then in the 1980s under the leadership of the Hawke-Keating government. And, in the spirit of bipartisanship, that approach was extended under the Howard government and the Rudd and Gillard governments and continues today. These agreements are important.

The bill will give Australian exporters increased access to the Korean market and help maintain our competitiveness with the United States and the European Union within the Korean market, so we welcome the opportunities that the agreement can present for our exporters in both goods and services. We note in particular the potential gains that will be there for exports like beef, sugar, wheat, dairy and wine and for our horticultural producers. In total these sectors employ over 200,000 Australian workers.

The economic modelling suggests that the KAFTA will boost Australian exports to Korea by about $3.5 million by 2030, boost the Australian beef exports to Korea by about 59 per cent and boost Australia's GDP by about $650 million by 2030. It anticipates that there will be an additional 1,700 jobs created as a direct result of the agreement.

Modelling is modelling, and it will tell a different story. But the important thing about this agreement, I have to say, is that it shows that by working with a country that shares similar values to ours, in an open trading arrangement, we are able to turn that country from being a net recipient of aid over the last 50 years to a net donor of aid. And the best way to do that is by developing the economy, ensuring that there is a fair distribution of the wealth within the economy and ensuring that they are able to trade with countries within their regions.

I said at the outset that we have some problems with the agreement. I would like to turn my attention to those. We were deeply disappointed—in fact, we were dismayed—when the Minister for Trade and Investment, Andrew Robb, dropped the bombshell that the government had agreed to an investor-state dispute clause within this agreement. It ran contrary to a lot of the things that the then opposition had been saying in relation to international agreements with other countries. We have a problem with investor-state dispute clauses because they give foreign companies the right, which they would not otherwise have, to sue an Australian government when this parliament passes laws which may damage their commercial interests. We believe in the sovereignty of this parliament and we believe that we should not be reaching agreements which unreasonably constrain the ability of governments and this parliament to make laws on social, environmental or economic matters out of fear of legal retribution from companies based elsewhere.

We believe that investor-state dispute clauses are a good idea that has gone bad. The intent of these clauses, a long time ago—a long time ago—was to ensure that when businesses invested in another jurisdiction and those jurisdictions—and I will choose my words very carefully here—let us just say that they did not have the same robust democracies and separation of powers between the judicial and political systems. So those businesses investing in those countries could do it in the knowledge that if there was a coup or if there were an arbitrary takeover of their investments within those countries then those companies would have a redress other than the redress in the not-always-robust legal systems of those countries.

Deputy Speaker, you can see the sense in that. On the one hand we are saying, 'We think it's important that we get investment into a country that needs the development; it might need the capital and it might need the technology.' But you can see the reticence of those businesses wanting to invest in that if there has been a history of civil war, if there has been a history of arbitrary detention and if there has been a history of political interference in the judicial process.

But nobody could stand in this parliament and suggest that that is the history of trade agreements and foreign investment in this country. Nobody could suggest that. So whatever the virtues of investor-state dispute clauses in the beginning—in the genesis of the idea—nobody could suggest that there is a serious issue. I know that people like to use the words 'sovereign risk', but nobody could suggest that there is a serious issue of a business investing in Australia and an Australian government of any political hue arbitrarily taking over that business—in fact, it is prohibited by our Constitution—or that there is going to be some improper political interference in a domestic judicial process. It is beyond contemplation that it would happen in this country.

Whatever the merits of investor-state dispute clauses, that is not the situation in Australia today. I am very proud to say that. And I see the member for Fremantle in the chamber today; I know that she has been a passionate campaigner in respect of investor-state dispute clauses and the pernicious impact they can have on the making of social and economic policy in this country and in other countries around the world. I support what the member for Fremantle has to say in respect of this issue.

It is not like we are tilting at windmills, either. We have seen examples in our very recent history where a sovereign government has made decisions in the public interest—decisions that have enjoyed support across the parliament—that have then been subject to litigation in international forums because they interfered with the commercial interests of a foreign company. I have in mind the example that the member for Moreton alluded to in his contribution. It has been well over two years since Philip Morris Asia commenced litigation against the Australian government, against the plain-packaging tobacco laws that were passed through this parliament with the support of the then opposition and the government and passed into law. They were world-leading public health initiatives. It is true that the plain-packaging tobacco laws interfered with the commercial interests of cigarette companies. But we argue that it should be within the gift of a sovereign parliament and a government to pass laws which it believes to be in the interests of its population. These are not arbitrary laws. Let me put it this way: there will be other countries around the world which will be looking closely at what we are doing and are attracted to the public health benefits of the plain-packaging laws. I am quite certain it is with this in mind that Philip Morris has initiated action against the Australian government—to try to scare other jurisdictions out of passing similar laws. There can be no doubt Australia will succeed, but Australian taxpayers are still footing the bill of defending the action in international courts. They are still footing the bill for defending laws properly made in the Australian parliament for a proper purpose, and it is these examples—it is not fancy or folly; it is not like we are imagining that something might happen—which drove us to say that we cannot support causes such as these in free trade agreements.

While I have stood here and very fulsomely supported the reaching of trade agreements with our economic partners—and I do—I can inform the parliament that if Labor is successful at the next election we will seek to renegotiate this part of the treaty to revisit the issue of the investor-state dispute clauses. Whatever their genesis, nobody can say they apply to Australia today in terms of the risks associated with foreign investors.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

The economy exists to serve the people of our society, not the other way around. That means when we as parliamentarians are asked to decide whether to approve a significant economic agreement, like this free trade agreement between Korea and Australia, first and foremost in our minds should be what is in the interests of the Australian people. That is our job here. It is not our job to sign off on agreements that contract out the determination of what is in the best interests of the Australian people to a small panel of unelected lawyers who sit as an arbitration panel. It is not in our interests to contract out the decision of what is best for the Australian people to multinational companies which are able to override our parliament and our government.

But that is what the Liberals and Labor are about to do by supporting this bill. What is being put forward here is a free trade deal that has some good components; I will talk about those in a moment. But for the first time it takes a significant step and says that if our parliament and our government is doing something in the interests of the Australian people, but which might possibly impinge on the profits of a multinational company or a company that is subject to this agreement, then they are able to take the government not to court but to a panel of self-selected arbitrators, who will be able to decide if Australia's laws should be struck down. That is significant, and this is the crossing of a threshold. We should not allow that threshold to be crossed. I will come back to that in a moment.

Part of the reason that we find ourselves in this situation is the secretive and undemocratic process that is associated with these kinds of agreements. The Greens believe in fair trade and there is scope for this bill, and the Korean trade agreement it legitimises, to be fantastic for this country. The Greens support many of the measures that it provides—for example, trade of beef, wine and agricultural products. If we could, we would be prepared to work constructively to make this a trade agreement that works for everyone. But it does not, and as it currently stands there are some serious, critical failings that make it impossible for the Greens to support. Because the government has locked out the possibility of an amendment from anyone in parliament, our hands are tied. As with all trade agreement negotiations, the secretive process that the government has undertaken with this agreement locks out not just scrutiny but cooperation. Parliament has been excluded from improving this trade agreement. The government does not believe that parliamentary scrutiny by MPs and senators could result in a better, stronger and fairer trade agreement. It has hidden this agreement from public scrutiny. The government negotiated the agreement in secret; cabinet signed the agreement in secret and then has taken it to the parliament for MPs to rubber-stamp—not to debate; not to discuss; not to analyse; not to ask questions; only to rubber-stamp. We can only vote either for or against this bill, but we cannot change it. That makes a mockery of every single member in this place. What this bill does is turn the parliament into nodding donkeys because we have no opportunity to improve this agreement. Cabinet is effectively being given precedence over the parliament. Parliament is meant to be the highest authority in this country. The Australian people are denied access and their representatives are denied scrutiny, and all we are left with is the Prime Minister and the trade minister saying, 'Trust us; this is good for you.' That is not good enough. That is unacceptable.

If we could, the Greens would refer this bill to a committee so that it could be independently evaluated, as has been recommended by the Productivity Commission. The Greens and the Productivity Commission are not traditionally good friends, but even the Productivity Commission says that agreements like this should be subject to a test to work out whether it is in Australia's interest, and there should be some independent review. Instead, such an evaluation has been disgracefully abdicated by the Joint Standing Committee on Treaties, which has singularly failed in its oversight function with respect to this agreement. Instead, what will happen is that, yet again, the coalition and Labor will be in lock-step on this bill and will vote for it, while being out of step with the community. The Greens will be left as the party that stands up for our national interest.

In December last year the Senate passed an order requiring the government to table the final draft of the Korea-Australia Free Trade Agreement two weeks before it was due to be signed. The government refused. This puts the government and this trade deal in contempt of parliament. In 2005 the Senate Select Committee on the Free Trade Agreement between Australia and the United States of America said it was alarmed by the lack of adequate research being undertaken prior to Australia committing itself to trade agreements and called for proper scrutiny and debate. In 2010 the Productivity Commission said that there should be independent and transparent agreement of the final text of trade agreements before the agreement is signed. Despite this advice, with this agreement that has not happened. Even the JSCOT found:

… the predicted benefits to the overall Australian economy from the implementation of KAFTA appear minimal …

The committee's report also described an impact of the agreement as a 'regulatory chill'. What this means is that the government may want to introduce protections in good faith but will be scared off from doing so because of potential reaction from overseas investors. What it means is that this trade agreement neuters the government and outsources the national interest to the balance sheet of overseas private companies—and it gets worse.

While the Greens believe in fair trade, perhaps the most toxic aspect of the agreement is the ISDS mechanism—the so-called investor-state dispute settlement component. Just for the record, so that everyone in this place knows, ISDS gives foreign corporations the right to sue sovereign governments like ours if they feel that changes to national policy or laws negatively impact on their profits. As far as the Greens are concerned, this subverts the democratic principle. This puts the financial interests of private companies above the national interest and above the democratic rights of every Australian. What this also means is that this agreement, this bill and the Abbott government introducing it mean that they are saying that private profit is more important than people's democratic rights.

What does it mean in practice? There is a good example happening right now. The big tobacco pusher and donor to the Liberal Party, Philip Morris, is currently suing the government after the previous Labor government introduced plain packaging legislation. I should point out that unlike the Greens, the Liberal Party continues to accept tobacco donations—but I digress. The reason that Philip Morris is allowed to sue the government is because of an ISDS clause in an investment agreement that this country has with Hong Kong. Imagine if the government loses the case. Taxpayers could pay damages to a private tobacco pusher because the government tried to reduce the incidence of cancer by introducing plain packaging legislation. What this government is saying by including the ISDS in this agreement is that Philip Morris's profits are more important than public health, than the public interest. How can that possibly be in our national interest?

The government could have removed all ISDSs from the Korean trade deal, but it did not. Instead, by including them, it is providing a mechanism for private companies to sue the government, potentially even this Abbott government, if a new law threatens the profits of a private South Korean company. The government claims it is fine because it says it has included so-called safeguards in the agreement. The trade minister has said that these so-called safeguards mean there is no prospect of an ISDS allowing another Philip Morris type case arising if it suits the government, but this has been contradicted in evidence that was before the committee. Professor Luke Nottage made it very clear, when he was asked if the wording in the agreement would preclude a Philip Morris type case occurring again, he said:

The answer is 'no' under the current wording. If that sort of claim by tobacco companies is a particular concern, the obvious way to preclude it completely is to have a carve out for measures in relation to tobacco.

But, of course, no such carve out exists in this bill or in the agreement. The government has left the ISDS mechanisms in. In fact, there is scope for another Philip Morris to sue the government based on this advice. Only the government can say why it wants ISDS mechanisms left in and why it wants to give licence to foreign companies to sue the Australian government.

The Greens introduced a bill into the Senate to ban ISDS mechanisms from all future trade deals, but this was rejected by the committee. Minister Robb clearly is not interested in producing a model investment treaty or going back and looking at previous agreements because he does not see ISDS as a problem. The Greens and many others do. I note, in this respect, the member for Fremantle and others in this chamber have spoken out against ISDS mechanisms. Now is the opportunity for your party to vote against it. Now is the opportunity for Labor to stand with the Greens and vote against this and send the government back to the drawing board to negotiate an agreement without an ISDS in it.

The question of intellectual property is also important because when it comes to the impact, negative or positive, of this free trade agreement on the country's intellectual property industry the government is flying blind. There has been no cost-benefit analysis produced. JSCOT's regulation impact statement and the national interest analysis make no mention of what the impact of the IP chapter of KAFTA could be on our IP industry. Could it harm Australian IP, could it help it, could it do both? No-one knows. What we do know is that JSCOT has again abdicated its responsibility as an oversight protection on these critical questions.

The Productivity Commission said in 2010 that Australia should not include IP in trade agreements without proper economic and public interest analysis. This has not been undertaken. KAFTA's chapter on IP entrenches IP with rights holders and no consideration is given to the public interest. What this could mean, for example, for people who need affordable medicine, the government cannot say.

One of the key untold stories of the demise of the country's car making industry is the role of KAFTA in helping destroy it. When Toyota announced in February this year that it would stop making cars in the country, it said:

… with one of the most open and fragmented automotive markets in the world and increased competitiveness due to current and future Free Trade Agreements, it is not viable to continue building cars in Australia.

Toyota got out while it could because it knew that the influx of cheap South Korean cars would make the already highly marginal car making market here unviable. So here we have one of the country's leading former car makers blaming the Australia-Korea Free Trade Agreement—not the carbon tax, as the government tried to spin it, but the free trade agreement. The free trade agreement itself, it said, dealt the final blow—and again we come to the national interest. We need to make an assessment about whether importing cheap cars at the expense of making cars here and all the related industries that depend on it is in the national interest.

The role of this agreement in killing off car making has been woefully underreported, although an article in December last year in the motoring newspaper supplement 'Drive', presciently titled 'South Korea Free Trade deal could crush car industry', said:

… it could be the death of the Australian car manufacturing industry.

Richard Reilly, head of the Federation of Automotive Products Manufacturers, whose members supply components to Toyota, Holden and Ford, said in that article:

Anything that potentially sees more imported cars sold here is absolutely not good for local manufacturers …

… The government needs to be extremely careful if this deal goes ahead …

The deal did go ahead, and we know the state that the automotive manufacturing industry finds itself in now.

We need to have a sensible discussion and an open discussion, fully informed by the facts, about the future of manufacturing in this country and the impact of these free trade deals on it. In the south-eastern states, which do not benefit in the same way from the mining boom as the resource rich states, there are massive pressures on employment and on the future of industry. Even now the government wants to end the assistance that is being given to those sectors early, which would put tens of thousands of jobs in the component sector at risk.

Let us have an open and informed debate in this country about whether we want a manufacturing sector and, if so, what it looks like and how we support it in these difficult times. Instead of having that debate, under the guise of secrecy and including through agreements like this, we are delivering blow after blow.

I conclude by saying this: we have an opportunity now to send this government back to the drawing board. I know there are many people on the Labor side who believe very strongly that ISDS provisions are wrong. That is part of the reason why this agreement had not been signed under the previous government. Now we have the opportunity to send the government back to the drawing board and come back with a better agreement that works in the interests of all Australians.

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014, the KAFTA tariff bill. In doing so, I acknowledge that considerable work has gone into developing this agreement. I acknowledge my support for free trade agreements that are in the country's interest. I also acknowledge that there will be a significant benefit that comes from the implementation of this agreement to a small sector of our Australian economy. There will be a significant boost to exports in the agricultural industry, and it will benefit particularly the beef industry.

This is a piece of legislation that was subject to review by the Joint Standing Committee on Treaties. It was interesting to note that there was a dissenting report brought down by the treaties committee. I must say that I find the dissenting report very influential in the formation of my remarks on this piece of legislation. I have to question whether this piece of legislation is in the national interest. The dissenting report highlighted many of the issues that I am particularly concerned about. After reading both the report and the dissenting report, I feel that the questions which have been raised in the dissenting report really need to be answered. It was the type of questions—which I will go through in a moment—that were raised in the dissenting report and by many of the submissions to the treaty's committee that have influenced my position on this piece of legislation.

It is interesting that the overall predicted increase in GDP after 15 years is just 0.04 per cent. For such a small increase I think, as a nation, we are making sacrifices that cannot afford to be made. The previous Labor government did not sign the treaty because they were concerned about the ISDS provisions, and, after exploring and reading this thoroughly, I am also concerned about those provisions.

It is interesting to note—and it was brought up by the previous speaker—the impact on the vehicle industry of the implementation of the zero tariffs by 2015, and how that has accelerated job losses in that industry. I think that is a real concern. I do not believe the current government has an industry plan—a plan that looks at developing a response to job loss or developing a jobs plan for the future. I think its knee-jerk reaction and its rush to sign this agreement need to be really criticised.

The government is sending military contracts overseas, whilst Forgacs in my local area is standing down people. It shows that the government has no vision or understanding of industry policy; the government needs to be on the front foot in relation to industry policy.

The AMWU submission to the committee reported that any free trade agreement should clearly benefit our economy—it is something that I and many of my colleagues believe—and not just a small niche. The niche that the agreement benefits is the agricultural industries, and when it is only 0.04 per cent of GDP after four years, you have to question whether or not it was a very proactive, wise decision to make, particularly when it leads to devastating other industries.

This report highlights some of the flaws in relation to enforceable labour, and of course it spends considerable time talking about the investor-state dispute settlement, the ISDS, and the implications it has for the Australian economy and nation. There were 34 submissions that objected to the ISDS and KAFTA. The ISDS provision gives additional specific rights to foreign investors to sue governments for damages in international tribunals on domestic legislation. That actually goes to the heart of our sovereignty and has an impact on our democracy. That should raise concern for every single member of this parliament, because we can legislate in this place and then it can be challenged. I do not think that any member would like to see our sovereignty impacted in such a way. There are a number of concerns about the implications of ISDS. The simple fact that ISDS have no independent judiciary. The arbitration panels are made up of investment law professionals who represent investor complainants, and only investor complainants can take action in ISDS systems. The panellists can also be an advocate one month and an arbitrator the next month. That is quite foreign to our judiciary system here in Australia, where judges cannot be practising lawyers. It is really difficult to see how there can be a level of fairness within this system, because the arbiters are paid by the hour. The incentive to drag out a case is obviously there—with them taking three to five years.

ISDSs have no system for precedents or appeals and therefore decisions can be quite inconsistent. I note that the Deputy Chair of the Joint Standing Committee on Treaties is in the House. He was very influential, from the report that I am quoting from quite extensively here. As a former member of the treaties committee, I would have to say that if I had been on that committee I would have supported the dissenting report because it does touch on all those issues. Yes, we need free trade agreements with countries, but they have to be in our national interests. We do not have to give away more than we get. We do not have to put ourselves in a position where, in 15 years time or 10 years time, we look back and say, 'We wish we hadn't had that ISDS clause in the contract.'

The safeguards that are included in this free trade agreement are not sufficient. The first safeguard sentence in KAFTA talks about safeguards, health and environment policy and they are really not adequate. It talks about rare exemptions and non-discriminatory regulatory actions by party. These are designed to apply to legitimate public welfare and public health—and issues have been raised around these particular issues in submissions to the treaties committee. 'Fair and equitable treatment' is not sufficient. I have probably spent enough time on ISDS, but to say that as a nation we are risking our sovereignty and democracy covers it fully.

There are some other areas that I have concerns about, such as copyright and IP. I do not think that our interests are significantly covered in KAFTA. There were submissions to the committee from a number of people, strongly criticising the intellectual property chapter of KAFTA. They highlighted that the provisions reflect bad policy and are contrary to the trends in IP law; that is something that should raise concerns amongst all members in this parliament. The dissenting report made some very significant recommendations, and I think that the government should look at those and should consider where it is going to in relation to that.

The other area that I am particularly concerned about is labour rights and migrant work programs. I note that there were a number of submissions to the committee on this particular area. The CFMEU submission to JSCOT on KAFTA raises significant and legitimate concerns in relation to the migrant work program and the impact on the movement of people. I know this has been quite an issue within industry—particularly in the construction and the mining sectors—for a long period of time of how a free-trade agreement will impact on the issuing of 457 visas, the safeguards around it and the implication for Australian jobs. Let's not forget that this is about Australian jobs. I am quite concerned about that because it particularly expands the area where employers could be granted access to 457 visas for Korean nationals without labour market testing. Labour market testing is an important component of the issuing of 457 visas. If that is not required, and Korean national workers can come here on 457 visas whilst Australian workers are disadvantaged by this particular provision of the legislation, I think that is unacceptable. Whilst it removes from the migrant work program the labour rights requirements for Korean nationals, the Korean government has retained the right to apply LMT numerical quotas and other restrictions to Australian citizens and permanent residents under its temporary visa program. To me that is not equitable.

I can see I am running out of time. I commend to the House the minority report of the previous committee. I ask members to think very carefully about this legislation, and I say that Labor in government would renegotiate the clauses surrounding the issues that I have raised concerns about. We truly do question whether or not it is in the national interests and—(Time expired)

Andrew Giles (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

I join Labor members in speaking to these bills and placing on the record, briefly, some significant concerns I have with the Korea-Australia Free Trade Agreement. These are matters that in large part are dealt with in the amendments moved by the member for Rankin. I should make clear that these are not objections to free trade per se. Rather, as the member for Charlton said in his contribution to this debate, fundamentally, this is an agreement which was poorly negotiated. These are matters which must be put before the House and before the Australian people. These matters are important, not simply in respect of this agreement which is the subject of the bills before us now but even more so with regard to the prospect of the China agreement which may arise in the not-too-distant future.

The four matters that I will briefly touch upon create a very troubling precedent for that agreement as well as being invidious in their own terms. The first matter I wish to speak to is the question of investor-state dispute settlement. Let me be clear: as a matter of principle, I can see no warrant for investor-state dispute settlement clauses—provisions that, in effect, grant greater rights to foreign corporations than domestic entities. The capacity of such provisions to interfere with Australia's sovereignty, the sovereignty of this parliament, is deeply troubling. I note that Labor in government would renegotiate this agreement to remove this provision and so restore the capacity of this parliament to determine, for example, environmental protections in place of unaccountable private arbitration. I note that over 500 ISDS cases have been brought against governments under treaties at great financial cost to the taxpayers and at a much greater and more troubling democratic deficit.

I am also concerned about the arrangements in relation to labour market testing. Labor opposes the removal of labour market testing in agreements such as this. Fundamentally, why shouldn't employers be asked to demonstrate the existence of a skills shortage before having regard to such provisions? Further to this point—and I note that this was a matter that was unable to be traversed by the Treaties Committee—it is extremely concerning that labour rights may, perhaps inadvertently, be diminished such that preferential access may end up being afforded to the products of forced labour, and I hope this is a matter that is capable of being attended to.

I go now to the question of copyright. As my colleague the member for Gellibrand, who knows far more about these matters than I do or ever will, has said, similar democratic concerns, as noted in relation to the ISDS provision, arise in relation to intellectual property. I simply restate his words and his contribution:

If the government wants to reform Australia's Copyright Act, it should make the argument for this change on the merits, not by hiding behind the flimsy claim that we cannot even debate the issue because of our trade obligations.

That nails the issue.

Lastly, the treatment of the automotive sector simply cannot be ignored. It may be that this is a case, unfortunately, of shutting the stable door after the horse has bolted, but the treatment of that sector and the workers contained within it cannot go without mention.

In conclusion, I feel it is important that I acknowledge the work of Labor members of the Treaties Committee—and I note the deputy chair next to me here. I also want to acknowledge the range of engagement I have had with a range of stakeholders—the Australian Manufacturing Workers Union, the CFMEU, the people of AFTINET and also the National Farmers' Federation—all of which I found invaluable in approaching my engagement on this important matter.

That free trade can deliver tremendous benefits should not and must not become a cloak to avoid detailed consideration of particular agreements. Past experience shows all too clearly that fundamentalist theory does not always deliver its promises in the real world. Free trade is, of course, not an end in itself. Our task here is to secure the best interests of the Australian people—their wellbeing must be our yardstick. A clear benefit right across the economy should be what we are seeking to achieve, not merely sectoral or subsectoral advantage.

Fundamentally, my concerns go to the issue around the investor-state dispute settlement provisions—these are concerns about democracy. Who decides and how they decide are fundamental questions for all of us in this place. We should not ever lightly walk away from our obligations to make these decisions on behalf of the Australian people.

Andrew Robb (Goldstein, Liberal Party, Minister for Trade and Investment) Share this | Link to this | Hansard source

This Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014 contains amendments to the Customs Tariff Act 1995 that will implement Australia's tariff commitments set out in the Korea-Australia Free Trade Agreement. These amendments are complementary to those contained in the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014. If I could use this opportunity to speak to the two bills that are in front of us here this morning, they are related very much. I am pleased to have this opportunity to conclude the debate on this important agreement.

As many know, Korea is Australia's third largest export market and our fourth largest trading partner. This is a very significant agreement. The Korea-Australia Free Trade Agreement will benefit Australian exporters, importers, workers, consumers and investors by opening markets and freeing trade and investment between Australia and Korea. With now 70 per cent of all the world's export output in goods and services going as inputs into other final products, the global supply chain issues are now of fundamental importance. Sometimes products can end up going across borders five or six times before they end up in a final product. So the ease with which you get customs arrangements, the services that sit around so many of these production processes, and intermediate goods and services have all become more and more important.

It is only 25 years ago that 20 per cent of total world exports went in as inputs into products. It is now 70 per cent. This is now very much a global village as far as business being done, and it is quite critical to get a more seamless process existing across borders, especially between our big trading partners. For so many of the highly sophisticated manufacturing products that Korea is known for, in so many cases Australia is, in a very competitive way, able to sell inputs into those processes and products and are doing so. This agreement will make those transactions more profitable and certainly make Australian manufacturing industry far more competitive in terms of maintaining and growing those sorts of relationships into Korea.

So it is not only important to exporters; it is important to importers as well. We get cheaper imported products into some of our processes. It is important to workers because it creates jobs. It creates, in time, many tens and hundreds of thousands of jobs over time. It is important to consumers as they get cheaper products. It is important to investors, because this agreement provides greater certainty to investors, both ways, by opening up markets and freeing trade investment between our two countries.

With one-in-five Australian jobs linked to trade, this agreement will provide an important boost to Australia's economy. The FTA secures Australia's competitive position in this market, where our competitors, such as the United States and the European Union, are already enjoying preferential access.

There was a huge element of urgency about concluding this agreement from the time that we won office, because some two years ago the European Union and the United States completed comprehensive agreements with Korea of this nature. Every year that went on where we were not in the same position with the same sorts of agreements, our industries were being disadvantaged. For example, in the beef industry, a 40 per cent tariff is applied by Korea against all beef imports. Korea gave, over 15 years, an opportunity for the European beef industry and the United States beef industry to reduce that tariff in a linear fashion—so 2.7 per cent each year, for 15 years—until it was eliminated.

So after two years, Australia's beef industry is at a 5.4 per cent disadvantage. If we were to let it go another year it would be a 8.1 per cent disadvantage against our biggest competitor. This is a half-a-billion-dollar market for our beef industry. We were at the risk, not only in beef but in a whole lot of other areas, for the same principle to apply. We were seeing our competitive position being eroded quite dramatically because we had not, and the previous administration had not sought, to complete this negotiation. In fact, it was, in many respects, the investor-state dispute settlement mechanism which has been in many ways used and abused by certain anti-trade unions. Some unions are very much in favour of trade, but there are some big unions that are anti-trade, and they have used this ISDS and put the weights on their colleagues within the Labor Party, in this parliament, to reject outright an investor-state dispute settlement mechanism.

This ignores the fact that we have, for 30 years now, had 28 investor-state dispute settlement procedures in agreements with 28 countries, and a number of those were implemented when Labor was in power. Most recently, the ASEAN-Australia-New Zealand Free Trade Agreement has an ISDS in it. Well, low and behold, listen to all the speeches we have heard today. Listen to the press releases. Listen to what the subcommittee had to say. The hypocrisy is huge. It is just a political tool to try and stop trade and to put Australia at a disadvantage. Those people have got an agenda which is not related to expanding our trade in growth and in our jobs position. The excuse for railing against this agreement, for holding it up and putting us at a very distinct disadvantage as a country has no grounds whatsoever. In fact, the ISDS provisions in these new agreements provide very strong carve-outs and safeguards for public health and environmental issues. Those opposite know it. They know this but they ignore this fact. Having been complicit in many ISDS provisions in the past, they are now saying it is the devil incarnate. It is just a piece of politics.

The results of the independent modelling that was being conducted show that the FTA will be worth over $5 billion in additional income to Australia between 2015 and 2030, and will result in an annual boost to the economy of around $653 million after 15 years of operation. This ignores the fact that the modelling could not accommodate the services advantages. This agreement is a 21st-century agreement on services. This agreement gives us access in services into a major North Asian country in a way that we have never had before, and it is going to provide enormous opportunity—not just on the goods side, but on the services side also, which I think will be the big growth area. Our economy is 80 per cent services. Our brand in terms of services, in so many areas, is gold standard in the region. The opportunities are enormous as long as we can get access to these markets. This agreement provides, for the first time, very significant access across a very wide range of services and it has been universally applauded by those in the services sector in Australia.

After 15 years of operation of the FTA, it is expected that our exports to Korea will be 25 per cent higher than they otherwise would have been. By 2030, exports of agricultural goods to Korea are expected to be 73 per cent higher than otherwise—a 73 per cent advantage from this agreement. Increased exports under the FTA are expected to create over 1,700 jobs on implementation. The FTA will make a difference at the farm gate, from mango exporters to macadamia nut growers to potato farmers. There is a 300 per cent tariff on potatoes; now, on implementation of this agreement, zero. Farmers will enjoy improved access to the Korean market on so many fronts.

Australia's beef exporters will be big winners, as I have just explained, because we will finally get onto that diminishing tariff line that is enjoyed by the US and the EU. It would have gone another year without settlement if we had not got into office, because the negotiations had totally run into the sand; a deadlock had been reached. Fortunately, we were able to unlock that.

In regards to KAFTA, I note that there was some confusion among those opposite. I really applaud the press release the other day by the Leader of the Opposition, and my counterpart the shadow minister for trade and investment, Senator Wong, where Labor said they will support the legislation and that increased access to Korea is important et cetera. All very noble sentiments, and yet we have got an amendment in front of us which seeks to delay it, renegotiate it, raise a whole lot of issues that Labor have supported in the past, but claim are totally unacceptable today. There is a fair bit of confusion, but hopefully the sensible comments and position announced on Monday by the Leader of the Opposition, and my counterpart, Senator Wong, will prevail. I note the press release of the Leader of the Opposition, and I am grateful for that support of this bill.

As I have said, negotiations commenced back in 2009, and as a government we are fully aware of the imperative of finalising it as soon as possible. We are looking to slow the growth of debt fuelled government spending. That has to stop if we are to put ourselves in a strong position and live within our means. But if we do reduce the rate of growth of government spending, we have to replace it with something. We intend to replace it with strong growth in the private sector. The KAFTA is a very important starting point to promoting growth, trade and investment with one of our major trading partners.

Every day of delay is another day Australia is at a competitive disadvantage against our major competitors, who have already achieved preferential access to this market. The playing field will be levelled through the finalisation of this free trade agreement. Next week I am travelling to Seoul to meet my counterpart in Korea, Mr Yoon Sang-jick, Minister of Trade, Industry and Energy. I will also be meeting other key members of the national assembly responsible for the passage of implementing legislation in Korea. When Australia and Korea have concluded their respective parliamentary processes and other procedures, we can start to benefit from this world-class agreement—hopefully by 1 January 2015.

In conclusion, I would like to pay gratitude to members in the trade division of my department, who have done a remarkably good job on this and other agreements. It has been a very heavy agenda. They have completed the processes in a very efficient manner. The advice and negotiating skills have been world-class. I am very grateful to them and to my office for the work that has been done to bring this about. I have great pleasure in supporting this bill before the House.

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

The original question was that this bill be now read a second time. To this the honourable member for Rankin has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.