Independent analysis key to good trade agreements

Published on Wed 16 October 2019 10:46am

For a trading nation like Australia it shouldn’t be the case that our national conversation about trade is relatively shallow and basic. At the moment, in many cases it’s reduced to not much more than cheerleading for any and all trade agreements as they come along. You would think, at the very least, we could acknowledge that every trade agreement involves negotiation and that no trade agreement achieves all the things we would like.

Mr Wilson (10:46am) — I’m glad to have the opportunity to speak on report 186 of the Joint Standing Committee on Treaties, which deals with two preferential trade agreements, the first with Hong Kong and the second with Indonesia. I’ll say something brief about each agreement in a minute, but I want to begin by making the point that we do need to be able to have a more detailed, constructive, and critical conversation about trade in this place and in the public domain.

For a trading nation like Australia it shouldn’t be the case that our national conversation about trade is relatively shallow and basic. At the moment, in many cases it’s reduced to not much more than cheerleading for any and all trade agreements as they come along. You would think, at the very least, we could acknowledge that every trade agreement involves negotiation and that no trade agreement achieves all the things we would like.

We should remember that while trade agreements may deliver an aggregate economic benefit, that benefit can be uneven: it can include gains and losses; it can create a substitution effect; and, in a relatively developed high-wage country like Australia, it can cost jobs. That’s a matter of fact; it’s a matter of common sense. It’s happened in the past and it will happen again; it shouldn’t produce howls of outrage to say that. The World Bank-commissioned analysis of the Trans-Pacific Partnership showed that the TPP would cost 38,000 full-time jobs in Australia while adding something like 0.5 per cent to GDP over 10 years.

One of the major shortcomings with our approach to trade at present is that we have no way of assessing on an independent basis the likely benefit of the agreements we settle. We don’t commission independent analysis of an agreement in prospect, and we can’t therefore assess whether its outcomes match our expectations in the short, medium or long term. I am glad that the JSCOT has again, with these agreements—as we did on a number of occasions in the 45th Parliament—recommended that the government institute the practice of commissioning such independent economic analysis. It’s worth noting that it was a recommendation in the submission to the JSCOT from the Australian Chamber of Commerce and Industry.

It’s also a matter of fact that modern trade and investment agreements involve matters that are well outside the core trade-related subject matter of tariff reduction and increased access quotas. They include arrangements in relation to the power of multinational companies to challenge government policy through questionable international tribunals. As we saw with the Phillip Morris action, these challenges are costly, time consuming and reform delaying, and have the potential to massively undermine vital policy in the public interest for the sake of preserving corporate profit. They include, in Australia’s case, arrangements that shape our approach to temporary foreign labour. In the past, these have been lopsided concessions on Australia’s part. In other words, we’ve given away that access without some matching opportunity. And what is most serious about this is that we’ve done so by abandoning the core principles of labour market testing and actual skills testing in key trades like electrical and plumbing.

Modern trade agreements include arrangements that are the opposite of a free market philosophy, if that’s your bag, in so much as they extend the intellectual property rights of big pharmaceutical companies. Indeed, if the United States had remained in the TPP, Australia was prepared to extend the monopoly rights for biologic medicines from five to eight years. That would likely have cost the PBS hundreds of millions of dollars or else delayed affordable access to these important medicines. All these extraneous matters, non-core trade matters, are, and should be, matters of concern to the Australian public. There’s a strong argument in each case that these arrangements are not in the national interest. At the very least we need to have that conversation. We need to be able to have that argument.

The Hong Kong agreement essentially formalises, or locks in, the existing free trade tariff arrangements between our countries. It doesn’t represent an expansion of access. It does help to retire the old bilateral investment treaty (BIT), and that’s welcome to the extent that it was the old BIT that Philip Morris used when they sued the Australian government. They used an investor-state dispute settlement mechanism. And we must remember that their action was not lost on the substance of the claim; it was lost because the tribunal determined that Philip Morris weren’t, in effect, a Hong Kong company and so they couldn’t have the benefit of that mechanism. We’ll never know whether they might have succeeded if not for that technical issue. Clearly, they had legal advice that suggested they could use ISDS to knock out Australia’s incredibly important and successful plain-packaging laws, which have helped reduce smoking, reduce the deaths that come with smoking and reduce the enormous costs to our health system.

The Indonesia agreement does include some substantial trade gains, including for grain producers and providers of educational services. That is welcome. It is welcome that we draw closer in our engagement with Indonesia, but there are non-trade aspects of the Indonesian agreement that deserve scrutiny. And while we recognise the benefits that may come with trade agreements, let’s not run scared from the fact that there are legitimate concerns about both the substance of these trade deals and the process by which they have been settled. Let’s remember that trade and investment agreements these days cover a lot more than tariffs and quotas alone.

There is a lot of huffing and puffing about the economic benefits of preferential trade agreements, and that’s easy to do when you don’t have independent economic analysis, but the government is very quiet about investor-state dispute resolution mechanisms, and it’s deathly silent about the concessions it has been making in relation to temporary foreign labour access and skills assessments. In the main, I think it is fair to say that most Australians would not know a lot about ISDS arrangements. When they come to know about them, they’re understandably concerned, and they should be, because ISDS allows foreign multinationals to sue the Australian government in questionable international tribunal processes. I don’t know what ‘negative globalism’ means—it strikes me as a bit of opportunistic gobbledegook—but if you were concerned about negative globalism and protecting Australia’s sovereign capacity to make laws in the public interest and the circumstances in which we make those laws, you would have a big concern about ISDS.

This government has added to the unholy mess of ISDS mechanisms by putting new arrangements in place with countries like Japan, for the first time, and additional replacement arrangements with numerous countries. Many are inconsistent with one another; some explicitly protect tobacco control, and some explicitly protect measures like the PBS. Others don’t. Some mention health and the environment. Others don’t. Why? How can we claim we’re putting in place the best ISDS mechanisms when every mechanism we sign up to is different from the last?

In relation to the expansion of temporary foreign labour in Australia, make no mistake: this government has been using trade arrangements to undermine Australian jobs and working conditions. It has, on a number of occasions, included in trade agreements provisions that allow contractual service providers to bring workers in without recourse to labour market testing, and those service providers cover something like 65 per cent of all professions in Australia. That is a matter of concern.

In chapter 12 of the Indonesian treaty there’s a provision for a future agreement on labour market access, and I moved, in the JSCOT process, a recommendation that said:

… the future resolution of an agreement with Indonesia on the movement of natural persons … only occur on the basis that any temporary foreign labour arrangements include the application of labour market testing and actual skills testing in relevant areas like electrical trades …

That wasn’t supported in the JSCOT process. The government doesn’t have to respond to that recommendation, because it didn’t get up. That means, unfortunately, the legitimate concerns and the legitimate anxieties of working people remain unaddressed.

We know that this government, which is making a big noise about reducing permanent migration, is at the same time looking to expand temporary migration in order to meet its own budget forecasts. The government is steadily building a very significant cohort of temporary foreign workers in this country—and we know that those people are often subject to exploitation and that they’re commonly employed on substandard pay and conditions—at a time when it is running the vocational and education systems in this country into the ground. What are going to be the consequences of that approach? We are living those consequences: stagnant real wages, falling standards of living, record underemployment, stalled productivity, and weak and falling economic growth. A lot of people are asking what the government is going to do to address those things. If you are asking that question, you have missed the point. This Coalition government has created those circumstances and is continuing to push all the buttons and pull all the levers that will continue to make it worse.

I will always support, and Labor will always support and has always supported, fair and free trade, especially where it can be advanced cooperatively on an even and multilateral basis, where it ensures that economic activity does not come at the expense of our common wealth and our wellbeing in the form of workers’ rights and our health and our environment. But, if we are to pursue trade on that basis, we need a much more constructive, detailed and critical engagement on this government’s trade agenda, rather than what we’ve got now, because what we’ve got now is just the senseless cheerleading of each and every trade agreement that is rushed down the chute.

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