House of Representatives, Parliament of Australia
Thursday 13th September, 2018
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Thank you Mr Deputy Speaker
Labor will support this legislation.
It implements the tariff cuts that the government agreed to make earlier this year when it signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The CPTPP is a trade agreement signed by 11 countries in Chile in March this year.
It replaced the TPP that was signed by 12 countries in New Zealand in February 2016.
That agreement had a clause in it which required countries representing 85 per cent of the combined GDP of that agreement to ratify it before the TPP could come into effect.
That clause meant that when President Trump pulled out of the TPP it effectively killed the agreement signed in New Zealand – and forced the other 11 countries back to the drawing board.
This agreement is different to the TPP in two substantive ways.
First, the economic scale of the agreement – the percentage of the world’s economy that it affects – is much smaller than the TPP.
The TPP covered 40 percent of the world’s economy. This agreement covers about 13 percent.
Second, it is also smaller in scope.
22 provisions that were in the TPP have been suspended in this agreement. They include many of the more controversial sections of the TPP, including the sections on copyright and biologic medicines.
The agreement itself eliminates more than 98 per cent of tariffs between signatory countries.
For Australian farmers it will reduce and eliminate tariffs on beef, sugar, cheese, wheat, barley, wine and seafood and expand quotas on rice, butter and skim milk.
In mining and oil and gas it will eliminate tariffs on iron ore, copper, nickel, butane, propane and LNG.
For Australian manufacturers it will eliminate tariffs on iron and steel products.
It will also give Australian universities the opportunity to expand or open new campuses in Brunei, Japan, Malaysia, Mexico and Vietnam.
They are some of the economic benefits. I will talk about the overall likely economic impact of the agreement in a moment.
It also has potential strategic benefits.
Building an overarching set of trade rules for our region and building stronger trade ties between the countries of the Asia Pacific is very important.
This is where we sell most of the things we make. Two in every three dollars we make from trade comes from Asia and this is only likely to rise in the years ahead.
It is in our interest for the region to be stable and secure and trade can help with that.
This is not an Asia-Pacific wide free trade agreement but it has the potential to grow over time.
I have said a number of times our long term ambition should be a regional trade agreement that includes all the countries of APEC. That is the holy grail.
That’s the sort of agreement that could help ensure that potential trade wars like we are seeing at the moment don’t erupt in the future and increase stability and security in our part of the world.
That’s the stated ambition of APEC, an organisation that Bob Hawke helped conceive and Paul Keating built into a meeting of regional leaders.
It was under Bob Hawke and Paul Keating, with extraordinary union leaders like my friend and mentor Bill Kelty that we ripped down tariff walls here at home.
The big changes Labor made opening up our economy in the 1980s and 1990s have helped create now 27 years of uninterrupted economic growth. 27 years without a recession.
They have helped to create more businesses and more jobs.
According to work done by the Centre of International Economics last year, the average Australian family’s real income is today $8448 higher than it would have otherwise been – because of those Hawke, Keating and Kelty trade reforms.
We tend to look back at that time and think what they did was easy. It wasn’t. Cutting tariffs was important, but it wasn’t popular. It helped create new businesses and new jobs, but all of that took time. And while some parts of our economy grew, other parts shrank.
It is important that we understand as we are debating this Bill, that cutting tariffs and free trade agreements aren’t overwhelmingly popular. There is a lot of scepticism out there.
There are a lot of people who think that all of this is great for big companies but not for ordinary workers.
A recent Essential poll found only about 1 in 5 Australians think trade creates more jobs for Australians. That’s a scary statistic given how dependent we are on trade.
You see the same sort of results in the United States.
Trade wars don’t just pop out of thin air. There has to be something that fuels it.
In The United States at the moment there are a lot of people who feel like their lives are getting tougher not easier – and one of the things they blame is trade.
That’s particularly true in places like Michigan and Ohio and Wisconsin, where wages are flat and jobs have gone overseas.
As Thomas Friedman said in his latest book:
“If people don’t have floors under them they will reach for walls.”
And that’s what people have done in the US.
It also helps explain what’s going on at the moment – with the threat of another $200 billion in US tariffs being imposed on Chinese goods and potentially another $267 billion more.
This is having a real affect here with the drop in value of the Australian dollar.
There is a lesson for us here.
We don’t have anywhere near the gap between rich and poor that you see in the United States, but it exists and it’s significant.
And just like America there are parts of Australia doing it tougher than others. Look at parts of North Queensland where youth unemployment is 17.6 per cent. Look at my electorate in Western Sydney where unemployment is double the national average.
We know because of what Hawke and Keating did, that they way to create jobs is by tearing down tariff walls not by building them. But we also know that not everyone benefits equally from free trade. Some do better than others.
Part of our job here is to understand that – and make sure we put in place the sort of policies to help make sure that as we open up our economy we don’t grow apart.
That’s why when Hawke and Keating were cutting tariffs they also set up Medicare and compulsory superannuation.
If we win the next election we will do the same sort of thing.
By making our tax system fairer. By giving bigger tax cuts to workers on modest incomes. And by putting more money into our schools, TAFEs and universities so more Australians have got the skills they need to work in this big, open, fast-changing world.
But if we want more people to support free trade and open markets and agreements like the one we are debating today, we have also got to be more open and honest.
That’s why I have been calling on the government to conduct independent economic modelling of this agreement.
I am not the only who has called for the independent economic modelling of trade agreements. So has the:
- Australian Chamber of Commerce and Industry
- Minerals Council of Australia
- Harper Review
- Productivity Commission
- Joint Standing Committee on Treaties
- Senate Standing Committee on Foreign Affairs, Defence and Trade; and
- The Joint Standing Committee on Trade and Investment Growth.
Despite all of this, the government belligerently refused to get this agreement independently modelled.
Fortunately someone else has.
The Victorian Labor Government commissioned an independent economic analysis of the CPTPP.
And so have a number of Australian business groups.
Both reached the same conclusion – that the agreement will provide relatively modest economic benefits in the short term and there is the potential for more significant economic gains in the longer term if more countries sign up to this agreement.
The analysis commissioned by the Victorian Government concludes that while the agreement does not benefit all sectors equally, no sector would be worse off as a result.
The analysis commissioned by a number of Australian business groups (including Ai Group, ACCI, the BCA and the Minerals Council of Australia) estimates that by 2030 the agreement would:
- Increase Australia’s national income by $15.6 billion
- Boost exports by $29.9 billion
- Lift investment in Australia by $7.8 billion
It also concludes that the economic benefits of this agreement are about 25 percent less than the TPP.
This sort of independent analysis is really important. It doesn’t overhype the potential impact of this agreement like some have, but it does show it will have a positive impact.
That’s important, given the scepticism a lot of people have about deals like this.
That’s why I’ve been calling on the Government to do it.
And why, if we win the next election all trade agreements will be subject to an independent economic assessment.
There are two parts of the CPTPP where Labor would have done things very differently.
The first is the inclusion of an Investor State Dispute Settlement section, and the second is the waiver of labour market testing.
As part of the CPTPP the Government has agreed to waive labour market testing for six countries – Canada, Peru, Mexico, Brunei, Malaysia and Vietnam.
This means that an employer will be able to bring in workers from these countries without checking first if there’s an Australian who can do that job.
This is the sort of thing that makes Australians very angry.
It’s not protectionism to say that before a company brings in an electrician or a carpenter or a mechanic from overseas it should first have to check if there is an Australian who can do the job. It’s just common sense.
Ironically, at the same time as the government is removing the requirement to advertise jobs in Australia before they are advertised overseas, they are doing the opposite with land.
In February the now Prime Minister announced that before agricultural land could be sold to foreign investors it first had to be offered for sale to potential Australian buyers.
Well, if it is good enough for land to have to be advertised here first, it is good enough for jobs.
And if the Prime Minister and this Government was really serious about being on the side of Australians they would understand this.
They shouldn’t have waived labour marketing in this agreement or the others that they have signed.
If we win the next election we won’t waive labour marketing testing in the trade agreements we sign.
We will also work to reinstate labour market testing for contractual service suppliers with the countries where the Liberals have agreed to waive it.
We will take the same approach on ISDS.
Labor doesn’t support the inclusion of ISDS clauses in trade agreements.
That’s because these provisions provide foreign corporations with increased legal rights and can be used to sue governments for legitimate policy decisions.
The EU is changing its approach here and there are reports that the United States is considering removing these provisions from NAFTA.
This agreement extends our ISDS obligations to one country – and that’s Canada.
If we win the next election we will negotiate with the Canadian Government to remove the application of this clause between our two countries – by way of side letters.
This is what the new New Zealand Labour Government has done. They have signed side letters with four countries that are part of the CPTPP. The effect of these letters is that the ISDS clause in this agreement does not apply between New Zealand and these countries.
We have also signed a similar letter with New Zealand.
This shows that it is possible to set these clauses aside and that is what we will seek to do.
To his credit, the former Minister for Trade Steve Ciobo also acknowledged that this was possible in his speech introducing this Bill.
But Mr Deputy Speaker, I think we can and should go further than that.
There is more that we need to do to make sure the trade agreements we sign are:
- Subject to proper scrutiny by this Parliament;
- Have the benefit of more input from business, unions and other organisations as they are being developed;
- Are subject to comprehensive independent assessment – at arm’s length from government; and
- Don’t include the sort of clauses I have just talked about – ISDS and the waiver of labour market testing.
And that’s why I am moving as part of this debate the following second reading amendment that has been circulated in my name:
That all words after “That” be omitted with a view to substituting the following words:
“whilst not declining to give the bill a second reading, the House notes that:
- 1. the Coalition Government has waived labour market testing for contractual service suppliers for six new countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership as well as including investor state dispute settlement mechanisms which Labor does not support; and
- 2. Labor believes the way Australia negotiates trade agreements needs to change, and a Labor Government will:
- a. seek to remove ISDS provisions from existing free trade agreements and legislate so that a future Australian government cannot sign an agreement with such provisions;
- b. seek to reinstate labour market testing for contractual service suppliers in existing free trade agreements and legislate so that a future Australian government cannot waive labour market testing in new agreements;
- c. legislate that all new free trade agreements would be subject to an independent national interest assessment before it is signed to examine the economic, strategic and social impact of any new trade agreement;
- d. legislate to create an Accredited Trade Advisors program where industry, union and civil society groups would provide real time feedback on draft trade agreements during negotiations; and
- e. strengthen the role of the Parliament in trade negotiations by increasing the participation of the Joint Standing Committee on Treaties (JSCoT) by providing:
- i. the Government’s Statement of Objectives for Negotiation to JSCoT for consideration and feedback; and
- ii. JSCoT with a briefing at the end of each round of negotiations”.
This represents the next tranche of Labor’s plan for trade.
In October last year I announced the first tranche of our trade policies.
This is the second and more will follow.
If we win the next election we will introduce legislation that prohibits the sort of clauses that we are concerned about in the CPTPP.
It will prohibit a future government from signing trade agreements that waive labour market testing or include ISDS clauses.
We will also fix the way trade deals are developed, negotiated and assessed.
At the moment the Parliament only gets involved in assessing and scrutinising trade deals once they are done.
In other countries it’s done differently – the legislative arm of government gets involved at the start and is kept involved throughout the process. I think that is very useful.
That’s why we will expand the role of the Joint Standing Committee on Treaties (JSCOT) so that members of that Committee are consulted at the start of the trade agreement process, provided with a statement of the government’s objectives at the start of negotiations and asked for feedback.
In addition to that, JSCOT will be provided with a briefing by DFAT after each round of negotiations.
This will provide valuable input for the team negotiating the trade agreement and help ensure that when a trade deal is completed it is scrutinised by legislators who are familiar with it.
We will also create an Accredited Advisor program, based on the ‘Cleared Advisors’ program in The United States.
At the moment DFAT consults informally with business and other organisations in determining its objectives in a trade deal and trying to implement. This will formalise and expand this process.
Accredited Advisors would be security cleared and provided access to draft texts after each round of organisations. Like the system in the US, Accredited Advisers will represent the full span of community interests including manufacturing, agriculture, digital trade, intellectual property, services, small business, labour, environmental, consumer and public health organisations, and state and local government.
We will also provide public updates on each round of negotiations and release draft texts during negotiations where this is feasible.
I made the point earlier how important it is that trade agreements like this are subject to rigorous independent economic analysis. I committed Labor to doing that in the first tranche of reforms I announced last October.
Today we take that a step further.
At the moment DFAT provides the Parliament with what it calls a National Interest Assessment of the signed trade agreement.
DFAT is full of exceptional people who do an extraordinary job. But getting the same team that negotiated a trade agreement to provide a report outlining why it is in the national interest is a bit like marking your own homework.
If we win the next election we will subject all trade agreements to an independent national interest assessment. That includes independent economic modelling and it will also look at the social and strategic impacts of the agreement.
These reforms were only announced on Tuesday but many of them have been backed by:
- The Export Council of Australia;
- The National Farmers’ Federation;
- The Australian Chamber of Commerce and Industry;
- The Australian Fair Trade and Investment Network; and
- The Australian Council of Trade Unions
Both major parties support free and fair trade.
I think we all realise that we are a trading nation. We rise and fall on what we sell to the rest of the world.
The opening up of our economy over the last four decades has made us a stronger and a richer country.
It’s also made the things we buy cheaper and the average Australian family about $8,500 a year better off.
But in an age of rising doubt and scepticism about the impact of globalisation and free trade we have to get better and be more open about the way we do this. And listen to what the community is telling us.
These reforms are part of this.
Doing better trade deals though isn’t enough. Trade agreements can help to open doors, but more Australian businesses still need to walk through them.
And that is where even more work is needed.