Simon Birmingham (SA, Liberal Party, Minister for Trade) Share this | Link to this | Hansard source

I table a document responding to the order for the production of documents concerning the China-Australia Free Trade Agreement. In tabling this document, I'm explaining the government's assessment, in accordance with Senate's order of 3 December, of China's compliance with the letter and spirit of the China-Australia Free Trade Agreement, known as ChAFTA; the extent and consequences of Australian economic dependence on the Chinese market; and the wider economic, strategic and diplomatic context of Australia's trade relations with China. I'll touch on each of those three points in response.

Firstly, I turn to China's compliance with the letter and spirit of ChAFTA. After 10 years of negotiations, Australia and China signed ChAFTA in June 2015 and, after both ratified it, the agreement entered into force in December 2015. It was the third bilateral FTA Australia concluded with a North Asian trading partner. Since 2015, ChAFTA has delivered six rounds of tariff cuts, which have provided expanded opportunities for Australian businesses and consumers. Australia's goods exports to China were valued at $149.2 billion in 2019, up 97 per cent since ChAFTA's entry into force, and total two-way goods and services trade with China was valued at $251 billion in 2015, up 66 per cent since ChAFTA's entry into force. ChAFTA has been used extensively by businesses, with around 95 per cent of eligible imports from China to Australia benefitting from ChAFTA tariff preferences, helping Australian businesses and consumers. This was up in 2019 from around 85 per cent in 2016.

Preliminary trade data for the calendar year 2019 shows growth compared to 2018 in a number of products where tariffs have been cut under ChAFTA. Some examples: exports of whole and skim milk powders grew by 22 per cent to $256 million, with 10 per cent tariffs progressively reduced; exports of fresh, chilled and frozen beef grew by 106 per cent to $2.67 billion, with tariffs of up to 25 per cent that were previously in place progressively reduced; exports of sheepmeat grew 79 per cent to $1.2 billion, with tariffs that were up to 23 per cent being progressively reduced; exports of frozen fish grew some 53 per cent to $26.5 million, as tariffs that were up to 12 per cent have now been eliminated; exports of fresh lobster and crayfish grew 17 per cent to $711 million, with 15 per cent tariffs that were in place now eliminated; exports of shelled almonds more than doubled to $171 million, with 10 per cent tariffs now eliminated; and exports of cosmetic skincare products grew by 39 per cent to $101 million, with 6.5 per cent tariffs that were in place now eliminated. ChAFTA has also improved access to the Chinese market for Australia's services exports, including education, health, legal and financial services. The latest available data from China, in 2017, indicates that Australian businesses utilising the preference rate for Chinese imports from Australia was over 90 per cent.

However, the Australian government has become increasingly concerned about a series of trade disruptive and restrictive measures implemented by the Chinese government on a wide range of goods imported from China, and that these disruptions have increased significantly in recent months. The Chinese government has publicly stated that these disruptions are due to legitimate trade remedies, biosecurity measures as well as noncompliance with other technical standards. They have included measures implemented through the operation of Chinese regulations on quality, labelling, safety, and pest and disease inspections.

In the view of the Australian government the targeted nature of Chinese government measures on Australian goods raises concerns about China's adherence to the letter and spirit of both its ChAFTA and its WTO obligations. Australia has raised these concerns with Chinese officials on multiple occasions, both in Canberra and in Beijing, and has asked the Chinese government to engage on these matters at officials and ministerial levels. The Chinese government has consistently spoken about its commitment to open trade and the multilateral trading system, as well as to its free trade agreements, including ChAFTA. All WTO members are expected to conduct their trading relationships in a manner consistent with their international obligations.

We have raised our concerns about the Chinese government's measures in the WTO, including most recently at the 25 November 2020 meeting of the WTO committee on trade in goods. We raised at that committee our concerns with respect to barley, wine, meat and dairy establishments, live seafood exports, logs, timber, coal and cotton. Only yesterday the Chinese government, through its customs agency, the General Administration of Customs of the PRC, notified Australian agricultural officials of a further suspension of a meat-processing facility, Meramist in Caboolture. The Australian government has raised its concerns with the Chinese government's antidumping and countervailing duties investigations in the imports of Australian barley, and has expressed our view that the Chinese government's processes, analysis and findings were inconsistent with WTO rules.

ChAFTA includes a structure of regular meetings intended to create an ongoing dialogue between Australia and China and a built-in agenda of reviews which provide avenues to address issues and increase two-way trade opportunities. After a reasonable start in bilateral engagement, in recent years the Chinese government's lack of engagement has prevented the use of these structures. Australia remains committed to building on the gains already achieved under ChAFTA, and we will continue to advocate for its timely and effective implementation, including those consultation mechanisms for the benefit of businesses and consumers in both Australia and China. Our government continues to work closely with our exporters in an effort to retain preferential market access into China, which has delivered such widespread gains to date, and we continue to raise issues of apparent or potential discriminatory actions targeted against Australia. The Australian government is considering all dispute settlement options in order to support our exporters and to ensure they can compete on fair terms.

I turn to the second point of the motion: the extent and consequences of Australian economic dependence on the Chinese market. It is a fact that China is Australia's largest trading partner, accounting for around 29 per cent of our total two-way trade in 2019-20. Over the same period, China accounted for around 35 per cent of Australia's total goods and services exports. Australia's exports to China reflect the complementarity of our economies and meet many of China's needs, including for resources, energy, food, tourism and education services. This trade has helped to lift hundreds of millions of people in China and, indeed, across our region out of poverty. The economic growth of China and the elimination of poverty for many millions of people is something that we warmly welcome and we wish to see continue, and it underlines the mutual benefit that comes from trade. Australian businesses have capitalised on these opportunities and, in doing so, they have made their own choices about markets, reliance and risk.

Australia is not unique in having China as its largest trading partner. At least 60 countries in 2018 counted China as their No. 1 merchandise trading partner. Australia's success in growing markets in China has not only been driven by Australian businesses but also by factors such as the size of China's population, its favourable demographics and its rapid economic development, as well as, of course, our geographical proximity. In turn, China's economic growth, we acknowledge, has been supported by our reliable and high-quality supply of exports, including iron ore, energy and agricultural commodities. The trade disruptions occurring at present are not only detrimental to some Australian businesses but also potentially to Chinese businesses and consumers as well.

As China opened up and its citizens started increasingly to travel and study abroad, it has grown to be Australia's largest inbound visitor market for both students and tourists. In the past five years, visitor numbers have increased by 69 per cent and total spending by 117 per cent. This, again, is a function very much of China's size, its economic development, its demographics and its proximity. It is not unusual for countries across our region to find a circumstance where their largest visitor market is, of course, the largest country in our region.

On investment, many do not realise that China is an important but, compared to others, comparatively small partner for Australia. The stock of total two-way investment was $163 billion in 2019, making China Australia's eighth largest investment partner behind countries such as the United States, the United Kingdom and Japan. The total stock of Australian investment in China in 2019 was, for the third year in a row, greater than Chinese investment in Australia.

The Australian government is committed, of course, to expanding opportunities in other markets. Australian businesses will continue to export to markets where Australian products and services are in demand, and where profits are highest relative to risks. Concluding ongoing FTA negotiations, implementing and upgrading existing FTAs and expanding their membership, and increasing Australia's two-way trade coverage by negotiating new FTAs will underpin trade growth and diversification in a post-COVID environment and will support the creation of Australian jobs. Our government has had considerable success in expanding Australia's FTA network including by expanding FTA coverage of Australia's two-way trade from around 26 per cent in 2013 to around 70 per cent covered today. Apart from ChAFTA, over the last five years our government has concluded and implemented FTAs with Japan, Korea and, most recently, with Indonesia, Hong Kong and Peru, as well as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, known as the CPTPP, which has opened up additional opportunities for Australian businesses in key markets, including across the Indo-Pacific region where some of the fastest growing economies are concentrated. A groundbreaking agreement on digital trade signed with Singapore on 6 August 2020 sets new global benchmarks for digital trade rules, offers an opportunity and a pathway for Australia to be leading in this space and enhances opportunities for Australian exporters. Progress is being made in trade negotiations with the European Union and the United Kingdom.

Signature of the Regional Comprehensive Economic Partnership agreement, known as RCEP, in November, means that Australia will become a party to a regional agreement that will provide a single set of rules for trade and investment across 15 regional economies—the largest ever such agreement. Although it is disappointing that India chose not to join RCEP in 2020, the door remains open to India. In the meantime we are exploring opportunities with India to recommence bilateral trade negotiations, particularly following the 4 June virtual summit meeting between Prime Ministers Morrison and Modi, where both countries agreed to elevate the relationship to a Comprehensive Strategic Partnership.

Throughout COVID-19 our government's actions have helped to keep supply chains operating, including through collaboration with trading partners via the WTO, APEC, the OECD and the G20.

I turn now to the last of the points in the Senate order: the wider economic, strategic and diplomatic context of Australia's trade relations with China. Growth and prosperity in the Indo-Pacific region has been underpinned by open trade both with China and with other regional partners. Australia's trading relationship with China has supported Australia's growth over time, as it has China's growth. It has helped through the global financial crisis and contributed to Australia's 28 years of uninterrupted economic growth. By providing some of the key inputs to China's modernisation and more recently to its development of a consumption based economy, Australia has in turn played a crucial part in China's development—as I noted before, a development that has seen China lift more people out of poverty than any country in history.

At the same time, the relationship is taking place in the context of increasing geopolitical competition, including China's growing economic and strategic weight in the global context. We make no secret that this competition is creating new dilemmas for us and for the rest of the global community. Australia has been consistent in our approach to our values, our principles and protecting our national interest. It is not we who have changed. It is in our mutual interest, though, and that of the region, to co-exist peacefully, promoting economic development and open trade to aid recovery from the COVID-19 pandemic. As a supporter and an adherent to rules based trade globally, Australia's continued economic engagement with China will remain important, as will expanding opportunities for Australian exporters to make the choices necessary to access other markets.

Multilateral institutions and organisations are key to sustaining Australia's trade relationship, guided by international rules and norms. Organisations, including APEC, the G20, and in a trade context, most importantly, the World Trade Organization, provide a platform for Australia to manage the challenges that arise from our evolving economic and strategic landscape. As the Prime Minister has said, international institutions play an important role as circuit-breakers to provide the space and frameworks for meaningful and positive interaction to be maintained as a bulwark against any emerging divide. This is not to say that these organisations and institutions are perfect. We must continue to improve their effectiveness, including by encouraging all members to play their part in terms of participation and enhancement as well as honouring the commitments they make through such organisations.

In relation to the WTO, Australia acknowledges the importance of reforming it so it can better serve the needs of its members. This includes resolving the impasse on appointments to the Appellate Body. The WTO's dispute settlement system provides an independent umpire for members to consider and resolve their disputes. That independent umpire must be used in ways that uphold the rules and must be able to be relied upon to deliver and uphold those rules effectively. Our government is currently considering our options regarding a WTO challenge on antidumping and countervailing duties on barley, where we feel this sector, like wine, has been so egregiously impacted.

Australia remains a nation that supports the free flow of trade and goods according to the international rules and norms that not only that we have committed to but that China has committed to as well. It is important that we remain open to working together and to finding a way forward. Our door remains open for ministerial dialogue. We continue to make that clear, including just last week. For all the economic and strategic reasons I have just outlined, Australia remains committed to constructive and workable relations with China. I hope that, fundamentally, this is something that the Chinese government wants too. We, of course, equally remain committed to opening up more avenues and more opportunities as we have done consistently over the last six years for Australian exporters and businesses to access even more markets around the world. I thank the Senate for the opportunity to address these issues this morning. I encourage all senators to read the government statement which I have tabled, and I understand the Senate will now take note of this explanation.

Rex Patrick (SA, Independent) Share this | Link to this | Hansard source

I move:

That the Senate take note of the statement.

I thank the minister for making the statement he has provided the Senate, both in the tabled document and in his address this morning. I would like to highlight several parts of the minister's very diplomatic comments on the state of the China-Australia Free Trade Agreement. The first, from the minister's statement, is:

The targeted nature of the Chinese Government measures on Australian goods raises concerns about China's adherence to the letter and spirit of its ChAFTA and WTO obligations.

It is a good thing that, after much delay, the minister now acknowledges the clear pattern of China's action in what is a coercive trade campaign. Even if the minister can't quite bring himself to use words like 'coercive' or 'punitive', there is no doubt that this campaign is politically driven with the open aim of punishing Australia for noncompliance with China's geopolitical ambitions. In this regard, it's significant that the minister also revealed that China switched off ChAFTA's consultative and review mechanisms some time ago. ChAFTA includes a structure for regular bilateral meetings and a built-in agenda of reviews to address problems and increase two-way trade opportunities. The minister has now acknowledged:

After a reasonable start in bilateral engagement, in recent years the Chinese government's lack of engagement has prevented use of these structures.

It's worth emphasising this point: in recent years, Beijing has switched off the processes of dialogue and review by which bilateral trade problems could be addressed.

The reality is China has been preparing to move against Australia for some time. It is well known that tension in the Australia-China relationship has been building over the past three years. It basically started with concerns about Chinese espionage prompting the Australian government to ban Huawei—an appropriate step—from the 5G network rollout, and this parliament's enacted new laws against foreign espionage. The Chinese Communist regime expressed dissatisfaction with these measures as they ran counter to Beijing's aim of increasing its influence and interfering within Australia.

Against that background, there was a significant report in The Australian newspaper in mid-January. In an interview with The Australian, a senior Chinese official bluntly signalled that Australia-China relations were heading downhill. Wang Chao, President of the Chinese People's Institute of Foreign Affairs, China's most influential foreign policy think tank, was a member of an official delegation for the sixth annual Australia-China political dialogue. In his interview, he set out several Chinese grievances, especially Australia's ban on Huawei and Australian criticism of China's human rights record, particularly the treatment of Uighurs in the Xinjiang province. Wang expressed the strong view that it was solely the responsibility of Australia to improve bilateral ties. He said Australia had to comply with China's core interests and major concerns. He said that it was up to Australia to do what was required. It was a view of a relationship in which China would call the shots.

What has changed over this year has been the escalation of China's hostile rhetoric and their resort to blatant coercive tactics, but China's political intent has been consistent. The minister could have been more honest today if he had directly acknowledged the politically driven nature of China's actions. China has long held a hierarchical view of international affairs in which Beijing should be the centre of the diplomatic universe. In Beijing's view, smaller, less powerful nations and peoples should pay homage and comply with directions from the centre. This is a world view forged long ago in the days of imperial China but fully held today by leaders of the Chinese Communist Party as their economic power and international influence has grown. Beijing sees our bilateral relationship as a one-way street where they must be in charge. They want to impose the diktat on Australia.

Part of the problem here is that there's been a lot of wishful thinking in Australian policy towards China for a long time. For far too long, our foreign policy elite, including both the coalition and Labor governments, imagined we would happily trade with China and make a lot of money while turning a blind eye to the totalitarian nature of the Chinese Communist regime. Both the coalition and Labor were naive in negotiating a free trade agreement with a regime with no respect for the rule of law. Some of that wishful thinking is still apparent in the minister's statement. The minister refers to Australia using all available dispute mechanisms under ChAFTA and the WTO. We'll get short shrift from China through the bilateral mechanisms and WTO appeals, which will take years to be determined and with which, as the minister mentioned, we have an issue in respect of the appeals jurisdiction. Even the Chinese compliance with any unfavourable ruling is quite uncertain, yet in that context, the minister has reaffirmed the government's commitment to 'building on the gains already achieved under ChAFTA'. Although it was not mentioned in the minister's statement, it was to that end that the government last month rushed to welcome China's expression of interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, CPTPP. That was a foolish move. Our government should not have been so quick to lay out the welcome mat to the Chinese President's latest geopolitical ambition at a time when China is engaged in a coercive trade campaign against us. In their desperation to ease tension, the government conceded a significant position, to Australia's disadvantage.

Behind the minister's carefully chosen words, the realities of our relationship with China are all too clear. China's ministers refuse to interact with their Australian counterparts, and the Chinese embassy in Canberra released a 14-point diktat laying out their demands for Australia to kowtow before there is any improvement in bilateral relations. Beijing no doubt viewed the government's response in relation to the CPTPP as a concession, and they will press for more. They've already turned up the pressure further in relation to our beef exports, and that won't end the matter. It's noteworthy that in a shift from earlier Chinese wariness about the original TPP agreement, Chinese state controlled media are now portraying the CPTPP as a means to further strengthen China's regional trade position, especially to boost China's digital services sector and digital economy, including ending the national security restrictions on Chinese companies such as Huawei. Australia should not engage with, let alone encourage, China's latest initiative until such time as Beijing drops its current coercive trade campaign and engages properly and bilaterally on the basis of mutual respect. Why would you throw away a few good cards in your hand? Prime Minister Scott Morrison is obviously no poker player.

The regrettable but clear reality is that Australia-China relations are likely to get worse before they stabilise. Australia must stand firm in defence of our national interests and values. We have the national resilience, as well as reliable and powerful allies, to assist in resisting China's attempted coercion. Australia must make a major effort to diversify our economic ties and reduce our economic dependence on Beijing. It may well be that the Australia-China relationship will be considerably more distant in the future. Meanwhile, it cannot be said that China's so-called wolf-warrior diplomacy is a very good formula for winning friends and influencing people. China's diplomats aren't political wolves, and most of the time their yapping is directed mainly at their political masters in Beijing. We would do well to ignore most of their feigned outrage and attention-seeking tweets. China has done much damage to its reputation as a trading partner and as a responsible member of the international community. Amid all the tumult, that one thing is very clear.

Jordon Steele-John (WA, Australian Greens) Share this | Link to this | Hansard source

There needs to be a couple of key observations made at the outset of this debate. First of all, the Australian Greens are the only party in this place who opposed ChAFTA when it was put to—I say when it was 'put' to the place, but it was never fully put to the place, and we shall get to that in a moment. We opposed it then and we oppose it now. Our view on free trade agreements, and particularly on this one, has not changed. We do not support agreements that do not explicitly protect the rights of Australian workers and the integrity of our democracy over corporate interests. A lack of labour market testing means that there are no requirements for jobs to be advertised locally. There are issues around environmental standards. There are issues around human rights.

These are issues which the Greens raise in this place time and time again. Senator Hanson-Young raised them as trade spokesperson before me. Senator Whish-Wilson raised them when he had the portfolio. It comes back to the fundamentally broken nature of our treaty-making system in this country. It is a treaty-making system which facilitates the executive—the Prime Minister, the cabinet and whichever powerful figures within the Department of Foreign Affairs and Trade exist at the time—colluding with business interests in creating deals that benefit corporate interests globally at the expense of the environment, human rights and labour standards both in Australia and around the world. It is a broken system that is rapidly losing its legitimacy and becoming an exception to the overall norm. There are many countries and jurisdictions in the world which have taken the process of treaty making and put it back where it should be—that is, with the parliament to scrutinise. It is absolutely unacceptable that all we get to do here in these legislatures is basically give treaties the tick and flick—or not even the tick and flick, really, but the shadow of the tick and flick. It gives no opportunity for the community, the social sector, the union movement and environmental campaigners to properly scrutinise the impact of these treaties.

It also has to be said, in addition to all of this, that the presence of investor-state dispute mechanisms within these free trade agreements has consistently been raised by the community and the relevant stakeholders as completely unacceptable. These are the mechanisms that allow corporate interests to sue governments, through quasi-judicial mechanisms where precedent doesn't exist, for taking action in the public interest. This is absolutely unacceptable to the Australian people and an issue which we will continue to raise in this place.

It is very important, I think, to recognise the context in which we have this conversation here today. There is absolutely no doubt as to the reality that the diplomatic relationship between Australia and the government of China is at a particularly low ebb, and there is no doubt that there exists a great deal of tension between our government and the government of China. However, the Greens would contend that in the analysis offered by the major parties and by others contributing to the debate today there is a fundamental misanalysis of the cause, which leads us to a space where we cannot effectively articulate the solution. Here I want to pay tribute to Janet Rice, our foreign affairs spokesperson, who is doing some fantastic work in this space.

It is so important to recognise that we have come to this moment, where there is such a profound breakdown in the relationship between the Australian government and the government of China, because of a process which has been in train now for more than a decade—that is, the setting of our security policy on a collision course with our economic policy and priorities in the region. It began with the Pacific pivot, proclaimed in the other place by President Obama on his visit to Australia in November of 2011. We have seen from that point an ever-growing closeness between Australia and the United States in our military relationship. We have seen troops permanently based in and rotated through Darwin, we have seen treaties signed with Singapore enabling the expansion of their military presence here, we have seen the beginnings of a defence framework being established with Japan, and we've also seen the opening up of our military installations in a way which is clearly understood to be sending the signal that we would be able to take the presence of such machines as American strategic bombers. All of these actions send a very clear geostrategic message, as they are intended to do: that Australia intends to maintain its status as America's largest aircraft carrier in the Indo-Pacific.

This is a position which is completely at odds with the stated diplomatic desires to develop greater trading relationships and economic partnerships for and with China. We have been willing participants in a strategy of military and economic containment in relation to China, as articulated through the TPP processes and as articulated and made material, in the security sense, through these various shifts in policy in relation to the American and other allied presences here in Australia.

At the same time, and subsequently, we have undermined terribly the ability of the Australian government to speak out on human rights issues by perpetrating incredible human rights abuses here at home and in other Pacific island nations. I speak now here clearly of our disgraceful program of detaining refugees and asylum seekers on Manus Island and Nauru. These practices undermine completely any demand made on the part of the Australian government to any of our regional neighbours to step up to any type of human rights standards while we at home perpetrate similar abuses. The Australian Greens have consistently warned that this moral undermining of our position in the region would harm our ability to call on our friends and neighbours in the region to hold and uphold human rights standards. It is also the case that, as we have continued to undermine this position, we have also failed to admonish and call out other state actors, such as Saudi Arabia and the United Arab Emirates, in their violation of human rights abuses. This absence of consistency undermines further our ability to call out the horrendous human rights abuses being committed by the government of China in relation to issues such as the treatment of Uighur people.

I sit here as a member of the Australian Greens, the only political party that, for 30 years, has been consistent in its criticism of the human rights record of the government of China. There is no doubt—there can be no question—that abuses committed by that government are unacceptable and in total violation of global human rights standards. It is because of our understanding of the importance of calling out these issues and this treatment of people that we have also been consistent in arguing that we here in Australia be consistent in our criticism of other global perpetrators of human rights abuses and be consistent in relation to our own human rights practices in Australia and under Australian political policies.

It is very clear what must now be done. There must be a de-escalation of this trade war that is developing between our two governments, because it hurts our peoples and it hurts the small businesses that depend on exports to China. There also need to be policy settings put in place that seek to diversify our economic trade pathways in the region so that we are not dependent on any one state actor. But we must first recognise the history of what brought us to this moment. (Time expired)

Question agreed to.