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Joint Standing Committee on Treaties
Korea - Australia Free Trade Agreement
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Joint Standing Committee on Treaties
Stone, Dr Sharman, MP
Thomson, Kelvin, MP
Whish-Wilson, Sen Peter
Fawcett, Sen David
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Content WindowJoint Standing Committee on Treaties - 05/08/2014 - Korea - Australia Free Trade Agreement
ADAMS, Ms Jan, Deputy Secretary, Department of Foreign Affairs and Trade
BRADDOCK, Mr Richard, Director, Investor State Dispute Section, Department of Foreign Affairs and Trade
FARBENBLOOM, Mr Simon, Assistant Secretary, North Asia Investment and Services Branch, Department of Foreign Affairs and Trade
LISSON, Ms Frances, Assistant Secretary, North Asia Goods Branch, Department of Foreign Affairs and Trade
MASON, Mr David, Executive Director, Treaties Secretariat, Legal Branch, Department of Foreign Affairs and Trade
MURNANE, Mr Simon, Trade and Market Access Division, Bilateral Engagement and Regional Trade Negotiations branch, Department of Agriculture
TROTMAN, Mr Paul, General Manager, Trade and International Branch, Department of Industry
WALTER, Mr Andrew Kenneth, Assistant Secretary, Commercial and Administrative Law Branch, Civil Law Division, Attorney-General's Department
CHAIR: Although the committee does not require you to give evidence under oath, I advise you that this hearing is a legal proceeding of the parliament and warrants the same respect as proceedings of the House and the Senate. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. If you nominate to take any questions on notice, could you please ensure that your written response to questions reaches the committee secretariat within seven working days of your receipt of today's transcript. To kick off, do you wish to make an introductory statement?
Ms Adams : Thank you for the opportunity to give evidence to the committee's review of the Korea-Australia Free Trade Agreement. KAFTA was, as you know, signed by the Minister for Trade and Investment, Andrew Robb, and his Korean counterpart, Minister Yoon Sang-jick, following the Prime Minister's visit to North Asia in April.
Negotiations began in 2009 and concluded last December. Both governments are now working towards entry into force before the end of this year. Australia's negotiating positions were based on extensive consultation with a range of interested parties. The final outcome was a result of a whole-of-government effort by 16 Australian government agencies led by the Department of Foreign Affairs and Trade. The number of officers here today including representatives from industry, agriculture and other departments reflects that effort and the breadth of the agreement.
As a high-quality comprehensive agreement, KAFTA is an important element in the government's economic diplomacy agenda and is firmly in Australia's national interest. KAFTA will liberalise our significant trade relationship with Korea, our third largest export market and fourth largest overall trading partner. KAFTA will significantly improve market access opportunities for Australian business. It will eliminate Korea's high tariffs on a range of goods including beef, wheat, sugar, dairy, wine, horticulture and seafood.
On entry into force, Korea's tariffs will be set at zero for 84 per cent of our exports with most other tariffs phased out quickly. On full implementation, 99.8 per cent of Australian goods exported will enter Korea duty free. KAFTA will also provide Australian services exporters with outcomes on par with the best treatment Korea has given any trading partner. Independent modelling by the Centre for International Economics estimates goods liberalisation alone to be worth nearly $5 billion in additional GDP for Australia over 15 years.
Australia will remove its remaining tariffs on Korean goods thereby allowing Australian consumers and industries that rely on imported Korean products as inputs to benefit from lower prices. While lowering tariffs on imported products is a clear economic benefit for the Australian economy, we acknowledge that this will increase competitive pressure for some businesses. To provide time to adjust, the government has negotiated phased tariff reductions for some affected industries.
KAFTA will help level the playing field for Australian farmers, as we have heard, in a market where many of our major competitors such as the US, EU, Chile and ASEAN countries have already secured preferential access. For example, US beef suppliers currently hold an 8.1 percentage point tariff advantage over Australian farmers. This gap will grow by 2.7 per cent every year we delay entering an FTA with Korea. Recently, another of our competitors, Canada, has finalised FTA negotiations with Korea. Canada is now also working towards entry into force.
In dairy, Australian exports of cheese have fallen significantly since both the US and EU received duty-free quotas under their FTAs. KAFTA will give our cheese exporters an immediate duty-free quota that will cover around 80 per cent of our cheese exports to Korea in 2013. That is why we are seeking entry into force before the end of 2014. Achieving this time line will give our exporters two tariff cuts in quick succession—one before the end of 2014 followed by further cuts on 1 January 2015.
Ultimately, KAFTA is a negotiated outcome. Although Australia pushed hard for full tariff elimination on every product, Korea was firm in protecting a small number of domestic industries it considered sensitive. The products comprise on 0.2 per cent of our total exports to Korea. Had we insisted on including these products, we would have delayed tariff elimination on our major exports and certainly with no guarantee of ever reaching a positive outcome.
I would also like to mention briefly resource and manufactured exports. Resource commodities and simply transformed manufactures such as aluminium and copper accounted for over three-quarters of the value of Australia's merchandise exports to Korea in 2013. Under KAFTA, Korea will eliminate tariffs on manufactures, resources and energy products across the board within 10 years.
Korea was historically Australia's second-largest market for titanium oxide in the period up to 2011. However, following the entry into force of Korea's FTA with the US, Australia's exports to Korea fell from $64 million in 2011 to $10 million in 2013. Korea's 6.5 per cent tariff on titanium dioxide imports from Australia will be eliminated immediately on entry into force of the agreement. Australia exported $531 million worth of pharmaceutical products including vitamins to Korea in 2103—our second largest market. Korea's tariffs on pharmaceutical products range from zero to eight per cent, and tariffs on almost 90 per cent of pharmaceutical products will be eliminated immediately on entry into force of the agreement with the remainder phased out over three years.
Before I conclude, I would like to briefly address two issues that have generated comment. First, the investor-state dispute settlement mechanism. The government's position is that it will consider ISDS on a case-by-case basis. The inclusion of an ISDS mechanism was essential to Korea and we negotiated a modern balanced mechanism that includes a range of explicit ISDS safeguards at least as strong as any other Australian agreement and certainly stronger than the majority to protect the government's ability to regulate in the public interest, including for public health and the environment. Australia already has ISDS provisions with 28 other economies. ISDS makes the Australian investment environment more attractive for foreign investors and gives our investors overseas increased protections.
The second issue is that in addition to the standard bilateral safeguards found in all FTAs, Korea insisted on special volume based agricultural safeguards on imports of beef, malt and barley, maize and refined sugar. Those safeguards will expire once the tariffs have been fully eliminated. They also apply to the US and EU under those FTAs. So in that sense, Australian exporters are not comparatively disadvantaged. I look forward to further questions.
CHAIR: I go back to one of the last points that you made. You said that it was essential to Korea to have investor-state dispute settlements in the agreement. Is it a fair thing to say that without ISDS included in the agreement, the agreement would never have been signed?
Ms Adams : Yes, most certainly. We had tried to conclude the agreement with Korea for quite some time previously on the basis of excluding investor-state dispute settlement and that simply was not possible; Korea refused to do so over a sustained period.
CHAIR: The other thing I think would be helpful to committee members is if you could talk through the safeguards that are involved in this agreement.
Ms Adams : The safeguards involved in the Korea-Australia Free Trade Agreement consist of a suite of provisions which operate in different ways to protect the government's ability to regulate in the public interest. You can group them in five major groups: firstly, the carve out of the Foreign Investment Review Board decisions fro investor-state dispute settlement; secondly, the exceptions;
thirdly, the schedules of reservations which allow Australia to reserve policy space to maintain or adopt new measures in specified sensitive areas; fourthly, safeguards built into the core investment obligations; and fifthly, the procedural protections that have been built into this investor-state dispute settlement mechanism. We can go through and discuss each of those if you would like.
CHAIR: Can you tell us what areas of public policy the first three cover—the carve-outs, the exceptions and the schedules of reservations?
Ms Adams : They cover public policy, including environment, health and welfare in very broad terms. The reservations which are listed in the schedules go into some specifics in terms of areas of—
CHAIR: Can you talk about why the procedural protections are in there? Previous witnesses said that it might not be the case that people would win an ISDS case but that they would simply bring them forward in a quite frivolous manner. Could you talk us through the procedural protections are and how they might address that issue?
Ms Adams : At this point, I am going to ask Richard Braddock to explain in further detail.
Mr Braddock : There are a couple of key procedural protections in the KAFTA ISDS text. The first of those is an expedited procedure to dismiss frivolous claims at an early stage of the proceedings and potentially to award costs against an investor in those circumstances. Another key procedural protection is the ability of the parties to issue a joint interpretation of any obligation in the agreement which is then binding on a tribunal. This is valuable because if the parties think that a tribunal is interpreting an obligation in an overly broad way, in a way that increases the exposure of the parties in ways they had not anticipated, they can issue a joint interpretation of what they consider that obligation to require and that will be binding on any tribunal.
CHAIR: You said that we have 28 agreements that have ISDS provisions in them. Would the protections in this agreement be as great or greater than in those 28 other agreements?
Mr Braddock : They are as great as any Australia's existing agreements. There are significantly more explicit safeguards for legitimate public welfare regulation than in the vast majority of Australia's agreements. In fact, compared to other agreements worldwide, KAFTA is amongst the most protective of treaties in terms of its safeguards for legitimate government regulation.
CHAIR: There have been varying submissions on the negotiation process. Can you talk us through what the department does in its consultation with industry as it tries to negotiate these agreements, in particular with KAFTA?
Ms Adams : At the beginning of the negotiating process, there is a call for general submissions advertised in newspapers, on the website and through our stakeholder direct communications. We generally receive a lot of written submissions at that early stage and the exporter interests in particular set out in very specific detail their priority objectives for the negotiations. We, of course, also hear from import-competing industries that are concerned about the impact of tariff reductions on their situation in the Australian market. We also hear from broader community groups in terms of the whole suite of policy issues that come up in these complex, broad trade agreements. We then conduct open meetings around the states and we have very informal and ongoing communication with interested groups, be they the exporter groups or others throughout the process. We, as the Department of Foreign Affairs and Trade, but also the Department of Agriculture, Fisheries and Forestry and the Department of Industry—if I could speak on our collective behalf—actively go and talk to groups interested at key points through the negotiation, particularly the major companies as well as industry associations with interests at stake. We often do that together. We also do it separately, I am sure. We have a very open way of working. We spend a lot of time on the phone and just meeting people who want to come and talk to us. We make a determined effort to accept any invitations to go to speak to people and explain what is going on. We also hold a little more formal and little more high level stakeholder consultation exercises from the department, where we invite all interested groups, community groups, NGOs, unions and business together to get an update of the entire trade negotiating agenda, including the specific FTA. That is probably it.
CHAIR: That is rather extensive. The other thing that has come up in some of these hearings is a desire for the parliament to be more involved in the treaty-making process. The example of the United States is often given. Could you talk to the committee about the difference in the systems of government between the United States and Australia and why the Congress is involved in the United States?
Ms Adams : The US Congress has an explicit role in setting and negotiating mandates, if you like, for the administration in return for an understanding between the administration and the Congress on the procedures that a treaty will then face once it is brought to the Congress for approval. It is sometimes called the fast-track approval process—that is, Congress sets out objectives that it expects the administration to meet in an agreement in order for it to then get an up or down vote process when it comes back to Congress for approval. That is one element of it.
The second element is this cleared adviser system that some of the witnesses have referred to. This is a very formalised, quite bureaucratic procedure, I suppose, that involves the US government putting people through security clearances and signing confidentiality agreements, and then providing these cleared advisers with US proposals under the terms of these confidentiality agreements. As I understand it, they have a large number of committees. So there would be an environment committee, a labour committee, a textiles committee, an agriculture committee and on and on it goes—services, IT, data, pharmaceuticals and everything you can think of that is covered by these agreements. These specific groups work with this cleared adviser process to provide formalised input to the USTR, United States Trade Representative.
Our current process is a much more informal and interactive process, where we basically talk to people who are interested as we go along as opposed to having super formalised systems.
Dr STONE: You talked about the informal chats we have. We go out there and meet from time to time and so on. The submission we have received is that at no point, unlike the US system, are the various stakeholders—and these would be cleared stakeholders, I acknowledge—given information about what is intended, what the negotiation looks like at that point. They do not get a copy of a draft set of agreements so that they can comment on what is likely to be the outcome. So rather than just information exchange, endlessly they are saying 'We would like to have an equivalent of the US system where we can be informed about what is or is not being successfully negotiated and perhaps have some input there.' What is your response to that sort of request?
Ms Adams : I do not think it is that clear-cut. I do not think the US groups get copies of the entire text.
Dr STONE: We were told they receive the proposals.
Ms Adams : They get US proposals and sometimes they might get small pieces of text. We would do the same, in fact, in our process. We would be very explicit to relevant groups and companies and interested parties as to what the positions were and what the outcomes were when we got to outcomes in particular areas. So I do not think there is a real difference, including tax, when that is relevant. When it is very technical and you need to know whether a quota-administration system is going to suit our industry, for example; then we would work with text with our stakeholders.
CHAIR: To go back to my point about the difference, in terms of involving the parliament and the Congress, you said the US has an explicit, defined role in the treaty-making process. In Australia, am I right, it is the prerogative of the executive? That is the point I was trying to get to.
Ms Adams : Yes you are right. I did not get to the end of that point. You are exactly right, Chair. With the executive-government system, that treaty-making capacity rests with the executive.
CHAIR: And where is that defined—in the Constitution?
Ms Adams : In the Constitution, yes.
Mr KELVIN THOMSON: As has been alluded to in the evidence this morning, during the Labor-government period Australia refused to agree to a deal with Korea that included an investor-state dispute settlement clause, so why have we agreed to one now? We are not some banana republic that runs around confiscating foreign property.
Ms Adams : We have agreed to the Korea-Australia free-trade agreement, including an investor-state dispute settlement, because we consider it is overwhelmingly in the national interest to do so. With respect to invest-state dispute settlements specifically, at government level no-one is accusing anybody else of being banana republics, be that Australia or Korea. Investor-state dispute settlement provisions are very standard provisions in investment agreements and trade agreements with investment chapters. The European Union has them in their agreements. The US has them in their agreements. Korea has them in their agreements. We have them in some of our agreements. It is a question of providing a more certain investment environment for foreign investment. It is about being able to have access to international arbitration, in extreme cases, and it is about giving our foreign investors those protections in other markets.
Mr KELVIN THOMSON: Doesn't the ISDS give foreign investors rights that domestic investors do not have?
Ms Adams : No. You need to analyse each of the investment obligations that are contained in investment treaties and compare them to domestic laws. It is difficult to make broad statements; nevertheless, if you look at expropriation, for example, there would be a lot of similarities between domestic protections against expropriation without compensation and those contained in international-investment agreements. In one, you have the avenue of redress through domestic courts; in the other, you have, as an option, access to international arbitration.
Mr KELVIN THOMSON: That's the point, isn't it? The Productivity Commission, when it did an inquiry into this back in 2010, said that foreign investors have greater rights because they have access to third-party arbitration.
Ms Adams : I think the other point to note is that there are reciprocal rights. Australian investors have access to that with respect to Korean law and Korean investors have that with respect to Australian law. In terms of the substantive obligations, there is likely to be a great deal of commonality between domestic law and the protections contained in the international agreements. As they are different bodies of law, it is hard to be precise without going into a factual situation.
Mr KELVIN THOMSON: Isn't ISDS inherently antidemocratic? It means that governments that want to take actions they believe are in the public interest or the best interest of the nation can find themselves being sued by multinational corporations and being brought before arbitrators who, either before or after the case, can be hired by those same multinational corporations?
Ms Adams : No. I do not think that is undemocratic. The question at the end—on the independence of arbitrators, if you look closely at the way an arbitration panel can be formed, each side can nominate an arbitrator and the third may well be, if we cannot agree, chosen externally, but you would always object to any arbitrator that would have a conflict of interest. So I do not think that is a realistic problem. Back to the ability to regulate. An investor-state dispute settlement does not prevent regulation in the public interest. If you look at the European Union, the US and other major countries engaging in investment agreements and FTAs, it is not as if there is no public-welfare or public-policy regulation or legislation evolving in those countries. It is patently not the case that these provisions prevent a government from introducing public-welfare policy.
Mr KELVIN THOMSON: The Australian government introduced plain-packaging legislation in relation to tobacco products and is being sued by Philip Morris pursuant to one of these clauses, ISDS, in the Hong Kong agreement. So surely the potential for that case is undemocratic and acts as a problem for governments that wish to regulate in the public interest.
Ms Adams : The case to which you refer is the first time any Australian policy has been subjected to an investor-state dispute settlement. I would also note that that particular measure is also subject to what I think is the largest WTO case, in terms of number of countries joining as third parties and as direct complainants in a WTO case. So it is not a run-of-the-mill piece of policy, in the public interest, that has been brought before an ISDS case. The cases will be defended very hard by the government in the WTO as well as in the investor state dispute settlement case.
Mr KELVIN THOMSON: I certainly think it is undemocratic. I also doubt that it is isolated. A 2009 survey found that there were 33 cases with claims of over US$1 billion and more than 100 cases with claims between US$100 million and US$900 million. That seems to me to be a significant number of cases; therefore, it is not a fanciful issue that foreign corporations will seek to attack regulatory or other government measures that they perceive as being not in their corporate interests.
Ms Adams : There certainly have been some cases. I think we have been through the statistics in estimates hearings and so on about the numbers that have been won by investors, which are small compared to those where the state regulation has prevailed, certainly under the NAFTA cases, which is the most common agreement under which these cases have been brought. But, yes, of course we are well aware that there have been cases since the early nineties, under NAFTA, that have generated a lot of concern. I have to say that, as agreements have evolved since that early NAFTA experience—which was not the first investor-state dispute settlement provisions but it was the first time that these appeared in agreements between developed countries—the protections included in agreements to safeguard right to regulate have certainly been evolving, and we would see the Korea agreement as the latest, most evolved version of investor-state, which really does provide a very good balance between the rights of sovereign governments to regulate and investor protection rights.
Mr KELVIN THOMSON: Why does this treaty have an ISDS clause and the Japanese treaty does not have one? If the Japanese were happy enough to sign a trade agreement without an ISDS clause, why weren't the Koreans?
Ms Adams : There were different policies in the government of Japan and the government of Korea, clearly, but the government of Korea has made extremely clear—and we demonstrated it by spending quite a lot of time trying to convince them otherwise—that they will not enter into new trade agreements that do not include investor-state dispute settlement, whereas the government of Japan did not hold that policy.
Mr KELVIN THOMSON: What did we get out of the Korean deal as compared with the Japanese deal that made this handcuff on our democracy worthwhile?
Ms Adams : That is a very loaded question.
Mr KELVIN THOMSON: Well, what did we get out of this one as compared with the Japanese one?
Ms Adams : In the Korea free trade agreement, once the agreement is fully implemented, we will have zero tariffs on 99.8 per cent of our exports to Korea, as well as a very modern, comprehensive, serious, full trade agreement across the rest of the agreement.
Mr KELVIN THOMSON: Can I turn to the manufacturing side of this. What work have you done in terms of looking at the potential impact of the agreement on employment in manufacturing?
Ms Adams : You, I am sure, are aware of the Centre for International Economics modelling work on the Korea agreement. That analysis showed that, after 15 years of KAFTA'S operation, our overall exports to Korea would be 25 per cent higher than they otherwise would have been and manufacturing exports would be 53 per cent higher than they otherwise would have been.
Mr KELVIN THOMSON: When you were negotiating the Korean deal, did you contact or discuss with Australian motor vehicle manufacturers Ford, Holden and Toyota whether a bilateral trade agreement with Korea could risk bringing forward their closure date?
Ms Adams : We consulted very deliberately and closely with the three companies. At the time we were doing these negotiations, closure was not something that was discussed, so we never discussed closure, but we certainly discussed the intention to conclude the trade agreement with Korea and worked very closely with the companies to understand the different automotive tariff lines and the different impacts that different phasing would have on the different products—the different cars and trucks, basically, as well as auto parts.
With Korea, companies had different interests. Some of the companies had interests in gaining access very quickly to lower priced Korean inputs, so we had as priorities getting Korea's tariffs down as quickly as possible on those products that were inputs into our production, including also some models—not just parts but some actual vehicle models. Other companies made it clear that it would add competitive pressures amongst other competitive pressures in the Australian economy, including the dollar or the other economic issues that impact on manufacturing.
Mr KELVIN THOMSON: The reason I ask is that the committee received evidence that there is a risk that one or more of these companies could bring forward their closure date. It would be terrible if that were to occur. It seems to me to be absolutely imperative that the automotive parts suppliers that presently depend on these manufacturers get as much time as possible to find other markets or other products, and it is imperative that the workers at these factories have as much time as possible to find other jobs, develop other skills and so on. Market theory is that the workers and businesses can move to other parts of the economy, but the market reality is that that will not happen unless there is sufficient time. Ford is not scheduled to close until October 2016. Holden and Toyota say that they will motor on until 2017. It seems to me that this is something that we need to hang onto rather than walk away from.
Ms Adams : The decisions for the companies are of course beyond my capacity to comment on.
Mr KELVIN THOMSON: But not beyond our capacity to influence.
Ms Adams : Maybe I misunderstood the question. I thought you asked whether they were going to change their decisions, to which I cannot respond.
Mr KELVIN THOMSON: Sure.
Ms Adams : I simply note that we did include transition periods for the tariff phase-outs of some of the elements of the Korean auto imports.
Mr KELVIN THOMSON: Can I ask about consultation, which the chair and Dr Stone have also asked about. In the course of the negotiations, who did you consult and in what detail?
Ms Adams : Across the board?
Mr KELVIN THOMSON: Yes, consulting people in Australia.
Ms Adams : I think we have a long list that is included in the regulation impact statement, which is on the website and is part of this.
CHAIR: What page is that on?
Ms Adams : It is apparently attachment 1 to the national interest analysis.
Mr KELVIN THOMSON: I have had my attention drawn to that, which I appreciate. Then the question is about the nature of that consultation, the level of detail of that consultation.
Ms Adams : As I said before, it would vary, depending on the interest of the group. For example, we worked very closely with Engineers Australia. We have included in the services chapter of the agreement the mutual recognition arrangement. We worked very closely with Engineers Australia on that. As you would expect, a lot of the exporter interests were very active in working with us. Service industries were very active. As we have said, we had a very active discussion with the automotive industry and we also had many opportunities to meet different groups in capital cities, including unions, NGOs, environment groups et cetera.
Mr KELVIN THOMSON: The reason I ask is that the question of consultation has been highly controversial in the evidence before the committee. On the one hand, we have unions and civil society saying that these bilateral trade agreements are a closed book, that no-one sees them until they are signed and they are then presented to the parliament on a take-it-or-leave-it basis. They say there is nowhere near enough consultation or transparency. On the other hand, we have agribusinesses who give completely opposite evidence saying they could not be happier with the consultation and they give the department absolutely glowing reports. So I think you would agree that there are all sorts of people who have vested interests in these trade agreements—agribusinesses, manufacturers, unions, farmers, internet service providers, copyright holders, consumers and so on—but am I right in thinking that there is a double standard at work: that some people are kept in the loop while others are kept in the dark?
Ms Adams : No, I don't think there is a double standard; I think there are differing amounts of priority that different groups attach to engaging with the negotiators throughout the course of proceedings. As I said earlier, we are very open to meeting and discussing issues with groups coming from all different angles—as you say, across intellectual property and public welfare as well as the commercial interests. I do not accept that there is a double standard; I just think that there are different degrees of interest in terms of active engagement from the relative groups.
Mr KELVIN THOMSON: I have some question that I wish to ask about intellectual property and copyright but perhaps it might be appropriate if others members of the committee have a go.
CHAIR: Sure. I think that works well. Very briefly, I just wish to put on the record that 66 submissions were received by the government before this, and 181 different stakeholders were consulted. I have one quick follow-up question from the deputy chair. He stated that the former Labor government refused to sign an agreement with ISDS. You stated in your evidence before that there are 28 agreements that Australia has with ISDS in it. Were any of those signed while the Labor Party was in government?
Mr Braddock : There were. I don't currently have the figure of how many were signed.
CHAIR: Can we get that on notice?
Ms Adams : Yes.
Dr STONE: I want to ask about the investment levels that were negotiated through this KAFTA in, as you say, the non-sensitive areas and the non-sensitive areas that relate to the Foreign Investment Review Board, our defence, nuclear, heritage and media. We note that that foreign investment threshold without it having to be put before FIRB has risen from $248 million to over $1 billion in the case of Korea's access to investment in Australia. What did we negotiate in way of access to Australian investment in Korea without having to access its foreign investment scrutiny processes?
Ms Adams : The Australian Foreign Investment Review Board threshold for non-sensitive sectors by private investors was raised to that higher level. Korea does not have a comparable screening body, so it is not a direct comparison—
Dr STONE: But it does have foreign investment scrutiny, does it not? It does not have a FIRB, I understand that, but if you wish to buy land, natural resources or industry sectors, there is government engagement in those proposals, is there not?
Ms Adams : There is in land—that is right. The investment commitments from Korea are scheduled in the very detailed way in the schedules to the investment chapter. So, basically, the disciplines—the main rules in the investment chapter that guarantee national treatment and most favoured nation treatment et cetera—apply across the board except where specified. The reservations are where there are specific Korean policies that treat an Australian or a Korean investor differently. So it is a different way of looking at it.
Dr STONE: I guess I am looking at equity in relation to the investment possibilities from Korea or from Australia in either country. You are saying that, while non-government Korean investors may buy agribusinesses, agricultural land, natural resources, mineral resources and so on, Australia will not have equivalent access in Korea.
Ms Adams : I should specify that, with respect to agricultural land, Australia reserved the right to impose Foreign Investment Review Board thresholds of $15 million and, with respect to agribusiness, $53 million. So those are not at the billion-dollar level.
Dr STONE: But we do not have the equivalent access to the Korean purchasing of land?
Ms Adams : It does not really work like that because they do not have the same system, so you cannot compare like that.
Dr STONE: It is fairly simple. For example, if a Korean private sector enterprise wishes to buy $15 million worth of enterprise in Australia, they may do that. I am asking: can we have a similar amount of access to Korea's agribusiness land?
Ms Adams : It depends on the specifics. Mr Farbenbloom may wish to add to that.
Mr Farbenbloom : Ms Adams has made the point that we did not look—and in FTAs we do not look—at a reciprocal measurement for each particular sector of what level of investment a Korean could make into Australia and what equivalent investment an Australian investor could make into Korea in that area. We do not negotiate on that basis in this—
Dr STONE: We do not negotiate equivalencies?
Mr Farbenbloom : In this particular area of investment—
Dr STONE: Do you think we should, in the interests of equity and not upsetting the Australian population when it realises that the same reciprocal arrangements have not been negotiated?
Ms Adams : You do not negotiate reciprocal conditions on each aspect of an overall package. Australia is a country that wants to encourage foreign investment and it sets its investment setting as it sees fit to suit its interests. We would not decide our investment policy settings on the basis of what another government was willing to do or to not do.
Dr STONE: I would have thought that was a bargaining or leverage point. Is there a clause in the KAFTA that gives both Korea and Australia equal to best outcome in future FTAs or bilateral or multilateral agreements that Australia or Korea might enter into? It exists, for example, with the CER with New Zealand. We have to give them equal to best should we later negotiate an agreement, as we did with the US FTA, where New Zealand was able to have the billion-dollar investment threshold because we negotiated that with the US. Is this similar to what we have negotiated with the KAFTA?
Ms Adams : I will ask Mr Farbenbloom to answer specifically, but, to clarify, the investment protocol with New Zealand was negotiated in its own right. It was not an automatic granting because of the US FTA. It was negotiated in its own right.
Dr STONE: So the CER with New Zealand does not have a clause which says we need to get equal to best outcomes with bilateral or multilateral agreements that each country has negotiated?
Ms Adams : Yes, but the investment protocol was negotiated as a separate stand-alone agreement. It did not trigger automatically on the basis of the US FTA, which, after all, was a decade ago.
Dr STONE: It came to this treaties committee and I understood it did. I must be wrong there, because, in terms of reciprocal arrangements, New Zealand would only allow us access to, I think, under 20 hectares and no waterfront land, whereas we had to give them equal to best to the US FTA. I remember that quite clearly in the evidence we took at the time. My memory may be failing me.
Ms Adams : I am really only—
Dr STONE: My question is: have we negotiated with Korea an equal to best outcome for future agreements that might occur? For example, in the negotiations now with New Zealand, if they negotiated milk powder access for New Zealand which was denied us, would that mean that we would then able to have milk powder access because they had negotiated that with New Zealand? Is there anything about best outcomes?
Ms Adams : Investment and services and goods have their different rules, so, with respect to milk powder, for example, no, it is very rare to find an MFN clause that says, 'Whatever you give to people in future you will also give to past negotiating partners.' But, on milk powders, as I think the dairy industry representatives said last time around, basically, the US and the EU did receive some quotas and then Korea said that it would not give quotas to any future FTA partners, whether that is Australia, New Zealand, Canada or anybody else. I would, however, note that a lot of our milk powder does enter Korea already under favourable terms under a duty drawback scheme, where we do not effectively have to pay the 176 per cent duty on product that is incorporated into Korean exports that are used as inputs. We have a strong trade in that area that will continue.
Dr STONE: Australia's biggest dairy trade is powders to Korea. Therefore, when it was explained that there would be no tariff concessions, you can imagine it did send shock waves through the industry and many expressed surprise at that outcome.
Ms Adams : For the record, can I point out that milk powder exports to Korea were $28 million and cheese was $87 million. So cheese, where we have the large duty-free quota and the tariff elimination, is by far the largest export.
Dr STONE: I guess I should have made myself clear—
Ms Adams : And it was not a bolt out of the blue; we knew this was coming for quite some time and informed the industry. As I say, a lot of the trade effectively occurs duty free.
Dr STONE: I did not make myself clear enough. Milk powders are the biggest exports of dairy manufacturers out of Australia. Milk powders are getting better and more highly refined all the time, but, as the major manufacturing sector in my electorate, believe me, milk powders are significant and growing given their significant value adding in future in terms of pharmaceuticals, sports drinks, health products and so on.
Ms Adams : Correct.
Dr STONE: Looking at the list of no-tariff concessions under the agreement, we include some icon foods for Korea. Obviously, honey is one of the things Korean tourists take home most often from Australia, along with some of our wines. You said these were sensitive foods, so we excluded rice, milk powder, honey, abalone, ginger, apples, pears, walnuts and others. Why didn't we then argue that we were very concerned and sensitive about the precarious state of our automotive industry and say, 'Sorry, just like you want to protect your rice and honey industries, we need to take some time to allow our automotive industry and its components industries to survive?' I am just concerned that with agribusiness some of the biggest producers of high-value agribusiness exports include rice to Japan, as you may or may not be aware, and certainly honey. Abalone is one of our most valuable Tasmanian exports. Apples and pears in Australia are increasingly moving away from manufactured varieties to fresh varieties, for fairly self-evident reason, and we have a significant ginger industry in Australia. All of these were excluded and it would seem they will not be revisited any time soon. What did we argue to the Koreans that we wanted 'protected', if I could use that word, from any further tariff concessions, like what is left of our textile or our automotive industries? Was that conversation ever had or is it that agribusiness is always the fall guy in these circumstances?
Ms Adams : These issues of priorities and sensitivities are really the centre of the negotiations that go on for years and years. We would have spent hundreds of hours discussing our objectives to achieve tariff elimination across the board with no exclusions. That is our absolute objective in every negotiation that we go into. On the other hand, the Australian policy is for us to have 100 per cent coverage of our tariffs eliminated. Nevertheless, on the areas that we consider sensitive—and there, in the context of Korea, that covers automotive parts, steel, copper, plastics, textiles, clothing and footwear—our approach is to say that we need transition times and that is what is reflected in the final negotiated outcome. On the Korean policy to absolutely insist on these exclusions, we resisted that with great passion for hours and hours and hours over the long, complicated tariff schedules that Frances knows very well, as do the agriculture department and the industry department.
In the end, the negotiating partner, if they have absolute red lines where they just refuse to give us further market access on things like honey or milk powder then, beyond argument and persuasion and spending years and years and years doing so, you cannot force the other country to do things they refuse to do. The option is: do you take an agreement that covers and eliminates tariffs for 99.8 per cent of your imports or do you wait another few years to see if you can get the last 0.2 per cent with no prospect of doing so?
Dr STONE: It depends on what you have been allowed to export into that country. We try to grow our exports. You are talking about a pie of a certain size. We wish to grow our exports to some of these countries and if they have been excluded from tariff reduction consideration then the door is shut, it would appear, for all time.
Ms Adams : It is not—
Dr STONE: I am conscious of the time. If I could go on. You talk about red lines. Apparently, we do not have those red lines in Australia. You said that we want to have tariffs removed on everything, so we appear to be more flexible. My question is around the benefits of FTAs. We all remember the sugar debate with the USFTA and I am sure you are very familiar with what happened there and what was played off against other products at the time. Given that the population of Australia needs to be brought with us in understanding and supporting a new FTA to justify the amount of effort we put into them and so on, how are they monitored in terms of their benefit to Australia? The USFTA, for example, has been in play for a number of years. I know that the CER was recently evaluated by the Productivity Commission. How often do we monitor the outcomes of these? Do we set benchmarks or KPIs for each of these for revisiting if they do not achieve the outcomes that we have anticipated?
You made some statements based on someone else's research recently that this is going to deliver X percentage of benefit over Y number of years. There is the argument that that is grossly overestimated. So, how do we monitor these FTAs? How do we make sure that we are not just having another FTA out there, so we can say, 'What good fellow are we'—that the Australian economy actually benefits from these? And, if it does not, how are we better informed about where to go with the next one?
Ms Adams : Our policy approach is that we believe in the benefits of trade liberalisation and open economies. You say we do not have red lines, but of course we have red lines on things that we are asked to do that we are not willing to do. But in terms of tariff policy we believe in the benefits of the increased competition and lower taxes on our imports. For US sugar, we did not have any change to the 87,000 tonne quota that was negotiated in the Uruguay Round under the US FTA. That is not because it was traded off against something else; it was that the US refused to alter the access arrangements under the US sugar program. Nevertheless, we did achieve effective tariff elimination on the rest of our large, diverse trade to the US.
Dr STONE: So, that has been formally evaluated? We have data to that effect?
Ms Adams : The way we look at the trade agreements is that the government's role is to eliminate the border barriers, and the market dynamics of what then happens in the absence of government imposed tariffs, what happens in any particular trade area, will depend on global circumstances. For example, we had beef quotas with the US before the US FTA. At that time we were bumping up against the top of those quotas. So, those quotas were becoming a real constraint to our beef exports to the US. We negotiated a significant increase and in fact eventual elimination of those quotas. After that time markets in other parts of the globe were growing faster and became more profitable because of beef cycles and developments in Russia, in Asia, in China. So, markets changed. My point is that you cannot assess the eventual outcome on a very specific basis attributing that to the FTA or not, because there are many factors that determine the trade.
Dr STONE: I guess that is my point—
Ms Adams : So, our objective is to remove the barriers and then reduce the impediments that the exporters have so that they have options to export, but where it best suits them.
Dr STONE: I guess what I am asking is: is there a regime of measurement, of monitoring of the increased trade between the two countries as a consequence of an FTA? Is that a systematic thing that is done? Or is it an ad hoc thing—when we think about it with the Productivity Commission, perhaps? For example, right now there is concern in the economy that we might have traded away our potential to have regional preference for, for example, food procurement for our own defence forces, or have our own government procure Australian food as a priority according to certain criteria, as Britain has just done. The argument is that FTAs do not allow it. So, are we actually monitoring what impacts over time these various FTAs have so that you are better equipped, when you go off and do another negotiation, to say, 'Oops, that's a problem; look where it's led us with the US FTA', say, or CER with New Zealand. I am just wondering. where is the systematic monitoring, measurement, informing of future negotiations by what has gone before? I think you are saying to me that there is none. It is kind of whatever happens out there; once we have removed the barriers we stand back and watch what happens with the market.
Ms Adams : I guess there are at least two different parts to the questions you are putting. In relation to trade volumes, my answer is that there are many more things going on than just the tariff removals, but the tariff removal is the job of government and then it is a commercial matter of what happens in terms of global export markets.
From a policy point of view, yes, of course government monitors and evaluates. Under each of the FTAs we tend to have annual internal review meetings with our partners to evaluate and discuss. In terms of government policy across the board, be it intellectual property or other issues, there are processes of policy review and evaluation internally.
Dr STONE: So, these are systematic? We can access them from parliament? Or the public can access the systematic evaluations?
Ms Adams : I do not think we would find a document that is a systematic evaluation on an annual basis of each of the agreements. But the policy issues that are contained in the agreements are of course evaluated, if you like, on policy positions that governments take.
Dr STONE: Do you mean the underlying principles?
Ms Adams : Yes.
CHAIR: How heavily was the government lobbied by the agriculture industry to conclude the agreement? We had the MLA stating that early ratification means $408 million more, and many members, including the nut industry, that had exclusions in it saying that they wanted the agreement signed. Perhaps this is for the Department of Agriculture. How strong was the agriculture lobby to conclude the agreement?
Mr Murnane : Very strong, because Korea is a very important export market for agricultural product. You mentioned the beef industry. They are on the record, and they were very keen for the agreement to be concluded quickly, because they were losing their competitive position to US exporters. And as the US export industry recovered from being excluded from various markets with BSE, it was really important for the Australian industry to gain parity and to be able to compete more effectively with the US exporters. So, they were very keen for an agreement to be concluded and for entry into force to come quickly.
Senator WHISH-WILSON: In relation to the carve-outs that you talked about with the ISDS in this Korean free trade deal, could you tell us whose expertise and whose advice you sought on those carve-outs?
Ms Adams : Sorry, Senator, I am not sure I heard the question properly—on the carve-outs, did you say?
Senator WHISH-WILSON: Yes. You mentioned that you have implemented carve-outs under this agreement with ISDS that were not in previous agreements. Could you tell us whose expertise and whose advice you sought for those carve-outs?
Ms Adams : The negotiators work under mandates from cabinet. We have a whole-of-government process for determining the negotiating mandates. The relevant departments, including the health department, Attorney-General's and many, many others, were involved in formulating the government negotiating position.
Senator WHISH-WILSON: So, it was done internally; there was no external contact with consultants, or expert advice?
Ms Adams : Well, of course the government agencies that have policy responsibilities have a lot of engagement with people outside government. We are all aware of the views of various groups and academics and the different views in the community. But in terms of formulating the public policy position, that is a task for government.
Senator WHISH-WILSON: In relation to what you mentioned with the differences in the academic community, it seems like ISDS is a very technical area. Did you provide any advice to the minister around the risks of ISDS before or during the negotiations or before you signed onto them?
Ms Adams : Well, yes, there were of course discussions between departments and the ministers and amongst ministers themselves about the benefits and potential risks of including investor-state dispute settlement.
Senator WHISH-WILSON: The committee had a document given to us in evidence last week from 100 prominent legal academics in Europe who were specifically focusing on the extensive carve-outs that they are looking at at the moment. Has DFAT viewed that document?
Ms Adams : We are aware of that consultation process. I think to some extent the European process is considering the sorts of protections that we have included in the Korea agreement as possibly being part of their preferred ISDS mechanism for the purposes of their negotiations with the US. The US will, of course, have its preferred negotiating positions, and they will have to sort it out.
Senator WHISH-WILSON: I understand that. The document we were given as a committee last week was by 100 prominent legal experts who were commenting on the ISDS that is being looked at in Europe, specifically on the carve-outs and whether they were adequate enough. Perhaps I could ask the chair to get you a copy of that if you have not seen it. I would be interested if you had any feedback on the legal expert opinion on carve-outs.
Ms Adams : No. We certainly are aware of the document. Thank you.
Senator WHISH-WILSON: In relation to IP, you said a bit earlier that some stakeholders do get told specific proposals and sometimes see bits of the text. Can you tell us if, in the negotiations, anyone saw any of the IP text and who they were?
Ms Adams : I could not, off the top of my head. I was the lead negotiator for Korea since 2009, but of course there are many, many agencies and many lead negotiators involved over that period. I could not attempt to say who said what to who.
Senator WHISH-WILSON: In terms of stakeholders who may have seen—in relation to what you said—parts of the text or specific proposals, can you tell us any details of the stakeholders?
Ms Adams : I am sorry; I am really not able to do that. We work with IP Australia and Attorney-General's on the IP negotiations, so—
Senator WHISH-WILSON: So you did seek advice from the Attorney-General's Department and IP Australia on whether the chapter was consistent, not just with current law but also with current policy?
Ms Adams : Of course. It is a whole-of-government operation to negotiate such a big, comprehensive agreement, so, yes, all the agencies with policy responsibilities, including Attorney-General's, were involved—not just consulted but participated in the negotiations.
Senator WHISH-WILSON: Do you have any specific advice you can give as to the date you received advice from your consultations with Attorney-General's and IP Australia? Or was it more just informal discussions, as you mentioned earlier?
Ms Adams : We just all work together. We formulate the brief. We participate in the negotiations together. It is a whole-of-government exercise.
Senator WHISH-WILSON: In relation to some of the earlier witnesses that we have spoken to, did IP Australia give specific advice as to the presumption of validity of patents and whether that was consistent with current policy? Can you answer that type of question?
Ms Adams : Our negotiating positions were certainly consistent with policy. I am sorry; I have lost the gist of your question.
Senator WHISH-WILSON: I was wondering whether IP Australia gave you specific advice on issues relating to IP and presumption of validity of patents and whether that was consistent with current policy.
Ms Adams : As I say, we worked together, jointly, throughout the process, and of course we negotiated consistent with our policy.
Senator WHISH-WILSON: One example that was raised with us was that the national interest analysis for this trade deal says that we will need to change the Copyright Act to overturn the High Court decision in iiNet. We have also just had a domestic proposal from the Attorney-General and the Minister for Communications that seeks to do the same thing. Did DFAT come to this conclusion on its own or was it approached by the Attorney-General's Department with these concerns?
Mr Walter : We have been heavily involved in the negotiations from day one, and in relation to the text in the national interest analysis, we did the analysis of what we thought the agreement would mean in terms of our current online piracy provisions.
Senator WHISH-WILSON: I have a question about what you mentioned earlier in response to a question from Mr Thomson on the car industry. You mentioned that you worked closely in negotiations over a number of years with the auto industry and that you meet and have discussions with all sorts of various stakeholders during these negotiations. Are you able to provide the details you specifically mentioned there, where you looked at the impact that various tariff changes would have on the automotive industry and the parts components?
Ms Adams : I will ask Mr Trotman to make some comments.
Mr Trotman : We had regular consultations with the car makers and also representatives of car component manufacturers. Over the course of the Korean free trade agreement negotiations, obviously market conditions in Australia changed dramatically. Korean auto penetration also changed dramatically over the six or seven years. On a regular basis we would talk to the car manufacturers to get their views on what their major defensive interests were over time. Over that period of time, they changed. We were talking to the auto manufacturers very much up to the end of the negotiations. As you can appreciate, over that period of time things changed on a fairly regular basis in terms of what makes and models of vehicles were Australia's priorities and what markets might be able to be developed on the components side of things within Korea. So we had regular dialogue. In terms of being able to give you details of those particular discussions, we can certainly go back and look through our diaries to give you the dates of various meetings. But I can say that they were quite regular over the course of the negotiations of the agreement.
Senator WHISH-WILSON: We heard earlier that in those discussions with the automotive industry they never mentioned closing their businesses at all. Surely they must have mentioned the risks of lower tariffs to their industry. Can you confirm that?
Mr Trotman : We would talk to the automotive makers in terms of their offensive and defensive interests. There have always been issues around the potential closure of Australian car manufacturers. In respect of whether that changed their positions in terms of their defensive interests, it really did not go to the heart of the conversations that we had with those particular companies. It was more about particular makes and models of vehicles and what they saw as their potential threats from imports from particular makes and models of vehicles from Korea. There was always in the periphery the issue of the closures of the car makers, but obviously that was something that was more front and centre near the end of negotiations rather than during the beginning or midway through negotiations.
Senator WHISH-WILSON: That confirms the evidence we received on this from the union last week. You mentioned that things were changing rapidly. The evidence we got was that the industry was under significant pressure in a lot of areas, that changes to the tariffs would essentially be the straw that broke the camel's back and this was not assessed in the economic modelling, for example, that was referred to earlier, nor was it in the national interest assessment. It is a very big industry with lots of employment. Given that we have gone back and found numerous articles and statements from people in the industry, last year, for example, going into the finalisation of these agreements warning that the car industry was under significant pressure and that this was going to be very risky, why wasn't this considered by the negotiators? With 90,000 jobs in this industry on the line, why wasn't this taken as a serious risk? Is it because of the ideological view that somehow we always have to remove and lower tariffs?
Mr Trotman : I think there are a number of decisions that the individual car makers had to take into account in relation to the ongoing viability of their operations within Australia. Some people argue that free trade agreements may have had an impact. I can certainly say that it would not have been the major determining feature of the individual car makers deciding whether they would continue operations in Australia. It was not put to us that it was the front and centre and immediate issue that they were looking at.
Senator WHISH-WILSON: Was it put to you that it would have a negative consequence if it went ahead?
Ms Adams : Can I just repeat the point I made before that the different companies had different interests with respect to Korea. In fact, the position that was put to us in general by the companies was that they supported the government's initiatives—over successive governments—to conclude the trade agreements. But as Mr Trotman said we had some offensive interests, some things we wanted to Korea to do in terms of its tariff reductions, and we had some defensive interests, in terms of transition periods for the phase-outs of the tariffs on our side. But to repeat what Mr Trotman has already said, the Korea trade agreement was never put as a major issue or even on the list of significant issues in terms of those broader corporate decisions that were taken by head offices.
Senator WHISH-WILSON: That would no doubt have been the corporations giving you that advice, if it was going to be received, whereas the unions made it very clear to us last week that the workers and the worker groups were very concerned about this, and that the corporate headquarters of multinational companies often had different agendas from the workers. I just want to put that point on record. They are obviously different stakeholders in the car industry who had different views on different concerns at the time.
One quick philosophical question: you made a comment earlier about some stakeholders getting to see parts of the text or specific proposals. What safeguards are in place to ensure that some stakeholders do not get advantages over others who do not get to see those specific parts of the text or proposals?
Dr STONE: Such as, for example, cheese manufacturers versus powdered milk manufacturers.
Ms Adams : It is hard to answer in the abstract. As in the dairy example, very often the same companies and the same industries—
Dr STONE: Sometimes, not always.
Ms Adams : Not always and it is not really a question of text. It was basically a question of the market access commitments that Korea was able to make at the end of the day. I have to say those issues were amongst the last issues to be settled. They were not given up early.
Dr STONE: That was one of my questions. I wanted to ask you this and perhaps you can take it on notice. When did you 'abandon'—and I do not mean that in the very emotive sense—or when were concessions allowed for the things on that list? We have the list. When were they made known to the agribusinesses? Was it right at the end of the show or were they always aware that they were unlikely to get any access for pome fruits, powdered milk, honey, abalone, rice, nuts and so on? When was that made known to them, and was it just as a lay-down misere or a fait accompli at the end? You can take that on notice if you like because it is important for our understanding of the transparency of the process, the consultation that went on and the different interests being balanced between, say, food manufacturing versus automotive manufacturing, both of which are huge employers in this country and of vital importance to the economy.
Ms Adams : For most of the agriculture products, we would have informed the respective groups as we went along what the Koreans were saying they were going to be able to do. We did not give up, if you like, on the exclusions. We hate exclusions, so we would not have given up until right at the end.
Dr STONE: There are also a lot of seasonality exclusions as well, as you are aware.
Ms Adams : We see those as seasonality inclusions—that is, the alternative was nothing. Being able to export during our export season, which is countercyclical, of course, was a way of including and managing the sensitivities in a way that avoided them being excluded. We do not really do trade-offs one against the other. We pushed each area as hard as we could with Korea. In the end, if they refuse to give us any new market access on particular products then it is for the government to decide if it is worth holding back the 99.8 per cent to wait for the 0.2.
Dr STONE: Of the future pie.
Ms Adams : I also wanted to say on rice that the situation was clear from the very beginning, given that the US, with all of the strategic and economic weight that it brought to bear in its negotiation with Korea, was unable to secure the opening of the Korean rice market. We made quite clear to our industry privately that we expected to have a US equivalent outcome.
Dr STONE: I was just going to comment very quickly on your saying that there are no trade-offs. Of course there are trade-offs. Everyone knows about trade negotiations. It is 101. There are always trade-offs of one sector over another when you are dealing with this. It is naive to suggest—
Ms Adams : I really mean to say—
Dr STONE: that we believe that you do not do trade-offs with the various categories of items, services and products. Of course we do trade-offs—we know that. It was very evident in the US trade negotiations. It is a matter of how we can do it in the best interests of the country.
Ms Adams : We push for everything and we do not get everything.
Dr STONE: Of course. At the end of the day, though, it is a matter of trade-offs. We know that. We understand that, and that is why—
CHAIR: Have you got a point?
Dr STONE: My point is that we were told that we do not do trade-offs. Yes, we do. That is the nature of negotiations. Secondly, that is why the measuring and the monitoring of the impacts is so important. We need to understand that.
Senator FAWCETT: Chair, I have to go. I have been listening and most of my questions have been answered. If I have anything else, I will put it on notice.
Mr KELVIN THOMSON: I will ask one question to start and then put the rest on notice and invite you to follow up and provide replies. The consultation attachment with the national interest analysis for KAFTA, at paragraph 17, says:
Consistent with Australia's existing obligations in the Australia-US and Australia-Singapore FTAs, and to fully implement its obligations under KAFTA, the Copyright Act 1968 will require amendment in due course to provide a legal incentive for online service providers to cooperate with copyright owners in preventing infringement …
How long has it been the government's position that Australian copyright law is not compliant with Australia's obligations under the Australia-US free trade agreement?
Mr Walter : To give a broad answer to your question, all three of these agreements require Australia to provide a legal incentive for cooperation between ISPs and copyright owners. Currently that is given effect through sections 36 and 101 of the Copyright Act. As has been discussed in this committee, the decision in Roadshow Films v iiNet cast some doubt on the effectiveness of those provisions in giving effect to that obligation. I do not want to overstate this, but I do not want to understate it. The position that we have taken now is that we think it would be prudent to make some amendments to those provisions to make sure that they operate effectively to create that legal incentive.
It has already been mentioned today that the government has released a discussion paper on online copyright infringement. One of the proposals in that paper—proposal 1—would be one way of going about addressing that issue. If it is of benefit to the committee, I am happy to table a copy of that discussion paper. It is available publicly, but I am happy to table it if it would be of assistance.
CHAIR: Yes, we have a copy.
Mr KELVIN THOMSON: As I said, I have quite a few more questions on this topic but, given the time, if the department is happy to take them on notice and to provide responses on notice, I might take that course.
CHAIR: Absolutely. I will put on the record as well my congratulations for such a big body of work over so many years. I am sure there are hundreds of hours that have gone into this agreement. I think that should be acknowledged. Thank you for coming to give evidence today. If the committee have any further questions, we will seek comment from you at a later date.
Resolved that these proceedings be published.
Committee adjourned at 12:32 .