ACTING CHAIR —I call to order the afternoon session of this hearing of the Joint Standing Committee on Treaties. This is a public hearing into a matter known as the Multilateral Agreement on Investment, or MAI. We have heard from a number of witnesses this morning. It has been, I think, a very deliberate and rewarding time that we have had with the committee. I now welcome before the committee Mr Philip Graham. For the record, could you please state the capacity in which you appear before the committee?

Mr Graham —I appear here as a private citizen.

ACTING CHAIR —Would you like to make a brief opening statement to the committee?

Mr Graham —I would. Firstly, I would like to thank the committee for giving me the opportunity to be heard on this matter. I consider myself to be very privileged.

Since being called to the hearing, I have been wondering which of the many great aspects of Australia which are threatened by the MAI I would focus on in this address. Yesterday, a writer for the financial press helped me decide. Ivor Vries, writing for the Australian Financial Review about the privatisation of Telstra, said:

Telstra Chairman David Hoare and Chief Executive Frank Blount have made it clear that they want to get the dead hand of government off their back.

Apart from the fantastic imagery evoked by his phrase—the image of dynamic corporate champions restrained by the death grip of a rotting corpse—Vries's phrase also contains an unstated and, at least where many in the business community are concerned, a widespread assumption that government itself is dead where business is concerned; that it has no further use and no role to play in the business of the day. By itself, his assumption is contemptuous enough. But, looking at what underpins it, the Australian government—at least in theory—is the will of the people in action. If the government is dead then so, too, is the will of its legitimising constituency.

According to the likes of Vries, the government has the touch of death where business is concerned and so should withdraw from business if it is to survive. The MAI proceeds on similar assumptions. It assumes that government is detrimental to business and assumes that liberal investment is unquestionably good. It assumes that governments require external enforcement to ensure the security and stability of increasingly liberalised investment. It assumes that what is good for business is good for society. As increasing inequities both in Australia and throughout the world show, this is not necessarily true. I acknowledge the need for investment. I also note the need for scrutiny over the type of investment that we have in Australia. We need an investment that is as committed to us as we are to it.

ACTING CHAIR —That is foreign investment, you mean?

Mr Graham —Yes.

ACTING CHAIR —As well as domestic investment?

Mr Graham —Yes. It needs to be socially responsible, especially if they pay tax here.

According to the ATO, of the 7,787 multinational interests operating in Australia, 50 per cent pay no tax whatsoever. On average, and depending on whose definition you accept, these multinationals account for between 60 per cent and 80 per cent of the profits being pulled out of Australia. They pay an average of 1.2 per cent tax. As a result, close to 70 per cent of the wealth generated in Australia accrues to the most wealthy one per cent. Here the case for a minimalist role for government completely unravels.

In postulating a dead hand for government, Vries insults the Australian constituency and its sole public institution, the Commonwealth government. If the Australian government has a dead hand, it is because government has either cut off its own hand or has stood by unconscious and anaesthetised by a fatalistic and insidious ideology while its hand has been surgically removed by interests outside those it is constituted to protect and uphold. But I do not believe that is the case. I do not believe in Vries, and I do not believe in his dead-handed government. I believe, rather, that the national interest is served by people who have its best interests at heart. And however tightly our government might feel its hands are tied, they are not dead yet.

So I argue for national, social and economic independence rather than subjugation to the needs of abstract, faceless foreign investors who have no stake in the welfare of the Australian people. I advocate for a fair and democratically elected legislature and against an internationally formed, unbalanced, undemocratic regime who are to enforce slippery and ill-defined international standards. I argue for a continued increase in the quality of life for all Australians and against a standstill or rollback of economic, environmental, labour and, most particularly, social standards. With this in mind, I hand over to you the discussion.

ACTING CHAIR —Thank you very much. I appreciate your opening remarks greatly. I guess that the role of this committee is all about putting a bit more power back into the hands of the average Australian, because we are exposing this treaty—this proposal—which has been negotiated by Treasury officials for a number of years prior to it being referred in a draft form by the executive of the government and which now, of course, is exposed further by the role of this subcommittee of the entire parliament. That is what the Joint Standing Committee on Treaties is all about. I guess that, with so many people in the public gallery here this afternoon, the fact that we are able to talk about this and to put on record concerns such as yours ensures that the democracy and the principles

that you have espoused are very much at the heart of what we are doing. I congratulate you on your opening remarks. Do you want to try to expand any further on that sense of national values and identity and that Australianness that you think might be put at risk by this proposed MAI?

Mr Graham —It is not any particular sense of values. It is not any particular value. It is the fact that the MAI overarches all the major political issues that are being addressed in the public forum at the moment. It overarches Wik, the privatisation of Telstra and any number of issues, because we cannot legislate for those things if this treaty is ratified. It removes our own determination.

ACTING CHAIR —You have suggested that perhaps there should be a referendum, which is normally a mechanism to change the constitution. But I guess you are looking for a national poll on this sort of proposal. Do you see that as an effective mechanism?

Mr Graham —I think a referendum is an effective mechanism. But, as you say, it was more an issue of democracy versus oligarchy—that we should allow people to have a say on these things with such a wide reaching treaty. If we are going to ratify something like this, everybody should have a say in it. Where are we going to be legislated from? Are we going to be legislated from internationally or from within the country?

ACTING CHAIR —I think I gave a great monologue about that a little earlier today when you were not here. I think that all of us on this committee are of the one mind: that we are elected to the Australian parliament, and what is in it for Australia is the operating rationale of the treaties committee, as it should be for all activities of the parliament. The concerns about entering into this treaty are great. This is meant to help smooth out some of the bumps that exist also for Australian companies operating overseas. It is meant to be—as treaties and arrangements tend to be—an agreement by which investment can take place between consenting states. Do you see the need for a raft of exemptions that we should put forward to ensure that our own particular standards and concerns are paramount?

Mr Graham —Under the agreement?

ACTING CHAIR —If this MAI was to go ahead, would you prefer to see it going ahead with a great raft of exemptions or exclusions?

Mr Graham —Of course, if it did go ahead. But I would obviously prefer that it did not. If you look at the end of the Uruguay Round of the World Trade Organisation, it produced one piece of paper—a single A4 piece of paper with agreements on it. I think it generated some 20,000 further pages to the middle of last year and onwards from there. I guess that it has expanded even more from that point. This treaty is roughly 200 pages.

ACTING CHAIR —So, in other words, I guess it gets to the point where there are so many exemptions and exclusions that you wonder what the point is of signing the thing anyway?

Mr Graham —That is right. How many multilateral agreements and bilateral agreements are we attending to now?

ACTING CHAIR —Would you prefer, as somebody said this morning, a series of bilateral agreements? In other words, we quite deliberately have an agreement with another nation; we hammer out what is in it for us, they hammer out what is in it for them, and if we agree then we sign, and if we do not agree then we do not sign, rather than a multinational approach?

Mr Graham —I think that is a fair approach. But do we not have those already? Do we not have a lot of those in place already? Is our economy not liberalised to the point at which we are virtually saying, `We want your investment. Just bring it in here and we will look after it. Australia wants to set itself up as a financial capital in the region.'

ACTING CHAIR —So you are not against foreign investment as such?

Mr Graham —No, not at all. I am against speculative investment. I am against the throwing together of financial institutions that have been separated since the 1930s, like banking, insurance and stockbroking, for instance—broking houses. What we are seeing now is invisible inflation. We are told that the inflation figures are quite low. But, if you have a look at these things, credit derivatives is the ultimate in that. It is the insurance on the notional capital raised on futures, I believe. I am not sure exactly what it is. But these are abstracted things that, all of a sudden, are supposedly produced, but nothing is actually produced. They are merely invisible money.

Senator COONEY —So you are saying that you want to see more than just money bought and sold?

Mr Graham —Certainly.

Senator COONEY —The exchange of capital has to represent real production in the sense of goods and services that we can use?

Mr Graham —Yes. At the moment, every three days more revenue is generated and more volume is traded in currency and financial instruments, if you like, than in the annual global trade in capital goods. If that is not hyperinflationary, I do not know what is.

Senator COONEY —Do you see any merit in having an agreement that controls that flow rather than simply looking at it in terms of investment; some international

agreement that somehow makes the flow of capital more responsible?

Mr Graham —Oh yes, most definitely. I believe the Tobin tax has been put forward for some time. Trying to get that together has been a nightmare for people. The new technology has made this a huge issue, because it goes 24 hours a day around the clock at the press of a button. I believe that even the screen times come into issue, where people do not even push the buttons any more; the machines are programmed to make buying and selling decisions. This is counted as growth and production, but it is not.

Senator COONEY —How did you get interested in this? You have put yourself down here as a student. You have obviously gone into this fairly deeply. You have done a lot of reading on this?

Mr Graham —Yes, miles of reading on it.

ACTING CHAIR —At least you have been able to get access to information, which I suppose disproves the concept of secrecy.

Mr Graham —Yes, I guess so. You mean secrecy regarding the MAI?

ACTING CHAIR —Yes.

Mr Graham —I think that a lot of the inflammatory talk about the MAI has been unreasonable to some degree, but I think there are very real concerns in there. For Australian investors who want some security and stability in their investments, I think it is counterintuitive to expect to invest and be secure and stable. If you invest, you risk. That is the entrepreneurial code. If you want to take money and put it into, say, factories in Asia or wherever for whatever reason, then you are taking a risk.

ACTING CHAIR —So the MAI is more or less being seen as a mechanism to lessen risk, in other words, to guarantee speculation producing a result?

Mr Graham —It is like going down to the TAB and being sure you are going to win.

ACTING CHAIR —I think some people went to jail for that. Are there any further comments that you wish to make to the committee this afternoon?

Mr Graham —Yes. I think that these large-scale systematising instruments really should be looked at on an ongoing basis, because this overarching system of one system for one global economy is not going to work. We have a unique situation in this country. It is past value, not even present value, that we are looking at; it is the value that has gone into the hundreds, thousands and millions of hours, lives and people who have put the infrastructure here, who have put this country together, and the government that has

backed that. No-one is going to put lines out to Biloela. No private company is going to do that. No-one is going to provide infrastructure other than a benevolent government. I think that is what we should be looking at.

ACTING CHAIR —I think it has always been the role of government since 1788 to provide infrastructure in Australia.

Mr Graham —Yes. I do not see why that should not continue.

ACTING CHAIR —I think I have said that about 20 times on the record in the last two years. Essentially you are saying that there are some false assumptions being made about human behaviour?

Mr Graham —Huge assumptions. Economic theory is riddled with it. Perfect information, perfect competition, perfect rationality do not exist.

ACTING CHAIR —And, for that matter, the nationalism and the `what's in it for Australia' sentiment that is obviously being expressed strongly about this particular treaty itself have not been assumed by those drafting the MAI.

Mr Graham —Certainly not. The national identity is part of what we are and who we are—not that I want to throw up a wall around Australia. That is generally the argument that is put to people like me who said that we should have more regulation. There can be a balance. There does not have to be fortress Australia, and we do not have to lie down and lay open our doors to everybody who comes along with five bucks and wants to throw it in the kitty.

ACTING CHAIR —In fact, based on all the work that you have done on this, would it be against Australia's best interests to have that fortress to shut out foreign investment?

Mr Graham —Of course. A socially responsible investment is the aim.

ACTING CHAIR —Thank you very much for your contribution this afternoon.

[1.35 p.m.]