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Wednesday, 17 November 2004
Page: 48

Mr CREAN (12:12 PM) —I welcome this opportunity to participate in the first debate on legislation in the new parliament. Mr Deputy Speaker Jenkins, whilst I have done so personally, could you formally convey my best wishes and congratulations to the new Speaker. Obviously, I also congratulate you and Deputy Speaker Causley. I look forward to many debates in this place over the next three years and to the order which it will now be the responsibility of you and your colleagues to ensure.

The Customs Amendment (Thailand-Australia Free Trade Agreement Implementation) Bill 2004 and the Customs Tariff Amendment (Thailand-Australia Free Trade Agreement Implementation) Bill 2004 implement the free trade agreement between Australia and Thailand. Whilst we will be talking about aspects of that, this legislation also provides an early opportunity to debate and comment on the government's trade policy. It is fortuitous, because it comes at a time when the Doha Round is still holding out some promise, we hope, for a great outcome. But it also comes at a time when there has been much discussion about the possibility of a free trade agreement with China. With both of these aspects coming up, I think it is important to reflect on trade policy not just in the context of this bilateral agreement but also in the context of others that may come, as well as on the broader aspects of multilateralism in trade policy.

In essence, our charge is that the government has pursued a disastrous export policy which has produced poor export outcomes and that the government is pursuing a flawed trade policy that is not in Australia's best interests. It is a policy that is too focused on bilateral free trade agreements at the expense of pursuing Australia's real trading interests through multilateral trade negotiations via the World Trade Organisation. It is in that context that I welcome a commitment made by the government in the Governor-General's speech yesterday. The Governor-General said:

The government is committed to the multilateral trading system and driving forward the Doha Round of trade negotiations, which promises enormous gains for Australia.

The words are important—we share the sentiment—but it has not been the practice of this government to date.

While there are benefits from this Thailand-Australia free trade agreement, there are aspects of it, such as agriculture, where we should have and could have done better. What this government has to do is learn the lessons from this deal and pursue better market access for Australian farmers in the WTO Doha Round as well as in other free trade agreements that are in the pipeline. It is also of great concern to us on this side of the House that the government did not take the opportunity provided through the Thailand-Australia free trade agreement to raise with Thailand its failure to observe core labour standards and to address environmental issues. It is for this reason that, whilst Labor will be supporting these two bills, I am moving a second reading amendment. I move:

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 the Government's failure to include provisions in the FTA covering labour and the environment”.

Labor's overriding trade policy priority is the WTO Doha Round of multilateral trade negotiations. It is this round that offers the largest potential economic and trade gains for this great nation. Labor governments have a proud record when it comes to international trade negotiations. It was Labor that played the key role in forcing agriculture onto the international trade agenda—and in keeping it there. It came as a direct result of the Cairns Group of agriculture free-traders which was established by Labor in 1986. In our view, this government has squandered that legacy and, through it, the opportunity to drive the Doha Round.

While Labor drove the Uruguay Round in the 1980s, through effective coalition building and commitment from the Cairns Group, that same commitment is deficient in this government. It has been obsessed with the pursuit of a free trade agreement with the United States. We believe that the minister was negligent in his multilateral trade responsibility, allowing the Cairns Group to drift and to diminish in importance, because in its place has emerged the G20 group of developing countries. They filled the vacuum. They took up the running when the Cairns Group drive started to dissipate. The G20 have displaced the Cairns Group as the third force, after the US and the EU, in multilateral trade negotiations. Apart from our success with the Cairns Group, Labor were also instrumental in devising the concept of APEC and making it a reality. Unfortunately, here too the Howard government has undermined our regional trade interests by ignoring the capacity and full potential of APEC, and that is a great pity.

Confronted by the challenges and difficulties of multilateral trade negotiations, this government, instead of trying to build on them, resorted immediately to the suboptimal path of bilateral trade deals such as the one that we are debating today. By their nature, free trade agreements discriminate against our trading partners who are not party to the deal. Free trade agreements do not offer anywhere near the potential economic benefits provided by multilateral deals. They are not able to tackle the agricultural export and domestic subsidies that do so much damage to international markets. They also divert scarce trade negotiation resources to the pursuit of outcomes that are minuscule compared to what is available through the WTO. It is interesting that the International Monetary Fund, in a report released just last week, reiterated effectively what are Labor's concerns—that bilateral agreements may contribute to a proliferation of regional trading blocs, reducing the political will for further unilateral trade liberalisation in the region and diluting efforts to successfully conclude the World Trade Organisation negotiations.

APEC is also well aware of these dangers, and we welcome reports that APEC leaders this week in Santiago, Chile, will agree to a set of APEC rules to guide the development of bilateral free trade agreements. This, I believe, is an important development. It is a reflection of the burgeoning of free trade agreements, so let us hope that these new rules are rigorous, adhered to and consistent with regional and multilateral trade liberalisation objectives.

In this debate I also want to say something about Australia's trade performance under this government. The fact is that the Howard government has presided over Australia's worst trade performance in postwar history. Australia's exports of goods and services have fallen over the past three years. Australia's average annual rate of growth in exports under the Howard government is less than half what was achieved under the previous 13 years when Labor was in office—there is half the rate of growth in export performance under this government. Under Labor, average annual growth in exports was 8.1 per cent. Under this government, the annual export growth has averaged only 3.6 per cent.

The government's failure on manufactured exports is even more alarming than the overall general decline in our exports. Under Labor, for example, manufactured exports averaged annual growth of 11.5 per cent in the five years to 1996. Under this government, manufactured exports averaged annual growth of only 3.2 per cent for the five years to 2003. For the comparable periods, when we look at elaborately transformed manufactures the growth rate under Labor was 13.9 per cent but under this government it was only 3.5 per cent. Little wonder that last year Australia recorded its largest ever trade deficit—a massive $24 billion—and its largest ever current account deficit of $47 billion, equivalent to six per cent of GDP.

With a burgeoning current account deficit at a time of rising global interest rates, the task of attracting international capital to finance the deficit becomes increasingly hard. This places upward pressure on Australia's interest rates, and this is a fault of the government that, ironically, promised to keep interest rates down and made that such an issue in the last election. Further, when it first came to office the government said that it would bring down foreign debt and tackle the current account deficit. But the record shows that under this government foreign debt has nearly doubled, to an all-time high of $393 billion. Using the Treasurer's preferred formula for accounting for foreign debt, that is more than $19,480 for every man, woman and child in Australia.

I said that the Prime Minister promised to reduce foreign debt. We all remember the debt truck. Where is it now? When the Prime Minister said the debt truck, according to him, would be reduced, foreign debt was at $180 billion. He has doubled it. He has turned the debt truck into a B-double and he has parked it in the driveway of every Australian household. This is a spectacular failure of policy, because if the government had delivered on its promise to reduce foreign debt there would have been less upward pressure on interest rates. No economist in the country will deny that. But, if you want further confirmation, I quote what the Prime Minister had to say in 1996:

We have some of the highest real interest rates in the world which are a direct product in part of the very high level of foreign debt.

... ... ...

The truth is that while we have such a high level of foreign debt we are going to continue to have an impact directly onto the level of real interest rates in Australia.

That is what the Prime Minister said in 1996, when the foreign debt was half what it is today. It is also an explanation as to why Australia's interest rates are higher than those of significant trading partners—higher than the US, higher than Canada, higher than the UK, higher than Japan and higher than the European Union. If in fact the government had delivered on its promise to reduce foreign debt, then there would not have been that pressure on interest rates that has put ours ahead of those countries I mentioned. And why is that? It is because the government's trade policy has been flawed. Despite the protestations that this debt is largely private debt and therefore does not matter, the impact on Australia is still the same because markets do adjust to correct economic imbalances, whether they are public or whether they are private.

It is also true that this is a time when the Australian economy needs greater balance in its growth, with less reliance on that growth coming from consumption which is effectively driven by consumer debt—that is, people putting it on the credit card. If we are going to move to less reliance on debt driven domestic consumption, we have to put more emphasis on the contribution to growth of what we get from net exports. But the fact is that net exports have detracted from economic growth for a record 12 quarters in a row. That has never happened before in this economy. It has never happened that for 12 consecutive quarters net exports were a negative contributor to growth.

Despite a stronger international economy and the fact that our terms of trade are at their highest level in 28 years, Australia has now recorded 29 monthly trade deficits in a row—so much for this government's reputation as a sound economic manager. Left unchecked, the widening gap in Australia's trade performance poses a serious long-term constraint on sustainable growth in this country, increasing further our economy's already heavy reliance on consumption and debt. That is why trade matters, why exports matter and why this government's policy is failing to do better for this country than we are experiencing.

With Australia's current account deficit near historic highs and foreign debt having doubled under Prime Minister Howard, Australia desperately needs a trade strategy which is focused on boosting exports and getting access into the growth markets of the world through the World Trade Organisation. But, despite the urgency of the problem, the government continues to direct the great majority of its trade negotiating resources to the pursuit of bilateral free trade agreements that do not offer anywhere near the potential outcomes available under the World Trade Organisation system of multilateral trade negotiations. Given this emphasis, Labor have repeatedly said that we will support bilateral free trade agreements if they are shown to be in the national interest and if they are consistent with advancing Australia's multilateral trade objectives.

Our preference would be to redouble the efforts through the multilateral rounds, but if this government's policy is to put the greater emphasis on bilaterals then they have to be bilaterals that drive forward the agenda, that support the development of multilateralism and the cause of liberalisation in trade. That is where our future is; that is where our best opportunities for export growth are. When Labor was in office it was demonstrated how, if we get this combination right, we can drive exports to a stronger level. The government has essentially put most of its eggs in the basket of bilateral free trade agreements and the record speaks for itself: a weaker performance in export growth than we could have otherwise been achieving.

In the process of developing these free trade agreements we also believe that the government not only has to consult with the opposition but has to ensure that the public and the parliament are fully informed of their content and implications when the deals are announced. In this regard I note that the Joint Standing Committee on Treaties has not yet completed its inquiry into this agreement that we are debating today. We know the reasons for that, in a timing sense, but this was the great initiative that the government trumpeted—the establishment of this committee—and yet it has not even made its decision in relation to TAFTA. In our view, it is a poor reflection on the government's commitment to transparency in the treaty making process and it is indicative of the unwillingness to allow parliament to undertake full scrutiny of treaties before they take effect.

The government has to learn the valuable lessons arising from its experience with the United States free trade agreement—and from this agreement—as it embarks on a possible free trade agreement with China. Labor will assess with great scrutiny the joint feasibility study now underway with China. The study has to be comprehensive and rigorous and the estimated economic gains from such a FTA must be realistic. They have to stand up; they have to pass what was referred to as `the laugh test' when the Senate was inquiring into the United States free trade agreement.

China is an enormous, rapidly developing market and it has great potential for Australia. But while it offers tremendous opportunity for Australia, we must also be mindful of its potential impact on the Australian manufacturing sector, including China's request to be treated as a market economy and the implications arising from that request for Australia's anti-dumping regime. This has to be a central consideration in any assessment of a free trade agreement with China. Any deal with China must prove to be in Australia's national interests and must be consistent with advancing our multilateral trade interests. It also has to be consistent with our broader trading interests in the East Asian region. Public concern about China's approach to labour standards and the environment also need to be taken into account as the process with China moves forward.

For our part, Labour is prepared to work with the government to address these complex issues in a constructive way. But it must be a genuine bipartisan approach on the government's part. There must be a preparedness to involve Labor in the process and not just expect it to agree when the deal is done. There also has to be full consultation with the public and, importantly, with the business community as well.

Specifically on the question of the Thai-Australia free trade agreement, the objectives of this are to more closely integrate the two economies and to deepen Australia's trade and investment links with the second largest and fastest growing economy in South-East Asia. Australia's merchandise exports to Thailand increased by an average annual rate of 17.6 per cent under the last period of a Labor government. In contrast, and reflecting the overall poor export performance of the Howard government, Australia's exports to Thailand have grown by less than a quarter of Labor's performance: by only 4.3 per cent.

We have examined carefully the content of the TAFTA and we have consulted widely with Australian business and other stakeholders who have a direct influence in it. TAFTA, importantly, does not exclude any goods sectors—as was the case with the US free trade agreement, which significantly excluded sugar. But a great deal of disappointment has to be expressed about the length of time it will take to reach free trade with Thailand in many agricultural products. TAFTA will not achieve free trade in dairy until 2025, 20 years down the track. That also happens to be five years after the APEC Bogor goals of free trade and investment in the region were to be in place. It is an outrageously long lead time for the opening up of trade in all dairy products for our farming community and a time frame which Labor would not have agreed to if we had been negotiating this deal. It will take 15 years to reach free trade in Australian exports of meat, sugar and potatoes.

Notwithstanding these and other exemptions, the fact is that 49 per cent of tariff lines in Thailand will go to zero and these account for 78 per cent of Thai imports. The Centre for International Economics estimates that this deal is worth $2.4 billion over 20 years in net present value terms. But, that being said, Thailand gets free trade on nearly every product it exports to Australia, while some Australian businesses have to wait 20 years—until 2025, as I said before—before getting free access into the Thailand market.

This deal, when it was concluded by Minister Vaile, also agreed to very generous rules of origin arrangements applying to textiles, clothing and footwear products produced in Thailand. Only 30 per cent of the regional value content of these goods is required to be sourced in Thailand. The remaining 25 per cent may be sourced from a neighbouring developing country. These generous rules of origin will be difficult to enforce. They have the potential to give rise to illegal transhipments of textile products through Thailand to Australia.

Concern has also been expressed about the potential impact of this deal on Australia's quarantine arrangements, because we know that Thailand has been campaigning unsuccessfully for many years to break down Australia's strict—and World Trade Organisation legal—quarantine regime so that it can export fresh chicken meat to Australia. Thailand has numerous exotic strains of avian diseases, most notably the highly pathogenic avian influenza, from which Australia is free. Maintaining the integrity of Australia's quarantine system is fundamental to the long-term future of our agriculture sector. So under no circumstances should our quarantine system be compromised in trade negotiations.

The gains Australia has made from this deal on services and investment are minimal. The government achieved improved access in only a small number of services sectors, such as general management consultancy, some construction and distribution services. TAFTA also fails to provide any increased access for Australian companies to Thailand's government procurement market. Government procurement is a sector in which Australian businesses are becoming increasingly expert, yet there is nothing in for them in this agreement. The government must use the framework of this agreement to pursue greater market access opportunities in coming years for services, investment and government procurement.

It is also disappointing that the government did not take the opportunity to raise with Thailand its failure to observe the core labour standards contained in the ILO's Declaration on Fundamental Principles and Rights at Work. According to the International Confederation of Free Trade Unions, Thailand has only ratified four of the eight core ILO labour conventions. If it was good enough to include a chapter on labour in the US free trade agreement, TAFTA should also have had the same. The Thai free trade agreement also fails to address the environmental obligations of each party under the deal. In stark contrast to the United States free trade agreement, TAFTA's failure to include environmental provisions reduces Australia's capacity to work with Thailand to pursue sustainable economic development. This is another major oversight on the part of the minister, and it is an issue that should be addressed further down the track.

Concern has also been raised about the inclusion of an investor-state dispute settlement mechanism in this agreement. However, Thailand's status as a developing country necessitates the inclusion of an investor-state provision to give certainty to Australian business about its legal rights when investing in Thailand. Australia's status as a developed economy with a sound and transparent system of law greatly reduces the prospect of Thai investors resorting to the investor-state mechanism to seek resolution of any dispute they may have.

Despite numerous problems with the content of the Thai FTA, it does provide important benefits for Australian business. Our criticism is not with that. It is just that we could have and should have done better. The agreement will liberalise two-way trade in goods and in some important investment and services sectors. It is important for the automotive and automotive components industry. The majority of tariffs in both countries will be reduced to zero on implementation of the agreement. The reduction in Thailand's tariffs—some of which are as high as 200 per cent—will provide considerable benefits. TAFTA does not suffer from exclusions and carve-outs as did the US free trade agreement, and the automotive sector is a significant beneficiary. Notwithstanding the long lead-in times, we support this agreement. We are concerned about its failure to deal properly with labour standards and the environment, and for that reason I moved a second reading amendment. But we want the government to learn from its experiences and to involve the Labor Party in future developments—particularly the China free trade agreement. Importantly, we have to commit together to trade through the multilateral round.

The DEPUTY SPEAKER (Mr Jenkins)—Is the amendment seconded?

Dr Emerson —I second the motion and reserve my right to speak.