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Wednesday, 21 October 2015
Page: 11965

Mr TAYLOR (Hume) (12:26): Twenty-five years ago I was a young student about to head off to Oxford to do a postgraduate degree in economics, and I had to think about what I was going to write for my thesis. It was to be a 10,000-word thesis, and it needed to be something substantial. My father, who, at the time, was president of the New South Wales Farmers and vice-president of the National Farmers' Federation, said to me: 'You should come and speak with our chief economist. He's an interesting guy—a bit quirky, but an interesting guy—called Gus Hooke, and he has some views about how the world will change in the coming decades that I think you should listen to and perhaps you could write your thesis about.' So I went off and originally I was going to spend half an hour with Gus, but I ended up spending a good couple of hours with him, and what he wanted to talk about was the rise of China and India in the coming decades and what it would mean for Australia and Australian agriculture. This was 25 years ago. I promptly ignored all of this advice and wrote a thesis on the brewing industry in the UK, which, at the time, seemed far more relevant to me, given my focus as a young student. But the truth was that Gus Hooke had seen where the world was going back in 1990. As I look at this free trade agreement and the other free trade agreements we are entering and, I am confident, that we will enter in the coming years, I think history will see, in 20 years time, that these are the most profound changes of this era of Australian history, because trade integration is the beginning of a much deeper integration with countries that will shape the world in the coming years, and we absolutely must be part of it.

I hear from many people that these free trade agreements do not have the impact that they are promised to have. Indeed, we had the Productivity Commission only a few years ago saying, 'These multilateral free trade agreements are wonderful, but bilaterals—we are just not so sure.' But I say to those sceptics: look at New Zealand. Look at the South Island of New Zealand, and you will see there an industry that is selling five times more of its product than it was only a few short years ago. Despite the tragic earthquake we saw in Christchurch only a few short years ago, we have seen a transformation of the economy of the South Island of New Zealand, and of New Zealand more generally, which they are enjoying—and, indeed, which means that, here and now, the New Zealanders are getting well ahead of us. Right at the heart of that was a free trade agreement with China and at the heart of that was an agreement on free trade of dairy products into China, which, as I said, has been absolutely transformative for the New Zealand economy and for New Zealand's future.

The truth is that, as a result of this, we are getting behind. To understand the full potential of it, it is important to understand what is happening in China. We heard, only a few short moments ago, the Prime Minister describing the transformation in China, which we all pay lip service to, but I want to dwell on it for a moment. Exactly what is happening there is not well understood or not as well understood as it should be. We are seeing growth in income, growth in the middle class, urbanisation, industrialisation—all those buzzwords—but underneath that is a deeper transformation which the Chinese have learnt from hundreds of years of Western history. It is a transformation in their economy built on three fundamental platforms: infrastructure, institutional change and innovation. Of course, the first part that we have seen so clearly as Australians is the infrastructure investment—the massive investments in roads, bridges, airports and high-speed trains. That requires iron ore and metallurgical coal. We are seeing a shift from that to copper, which, again, is a fundamental input in that industrialisation and that infrastructure, but we have also seen a shift to thermal coal. Despite what some say in this House, the truth of the matter is that China's consumption of thermal coal has been growing at a dramatic pace and Australia has been a beneficiary of that.

The next stage of development is equally important. As those new institutions come into play—institutions which will inevitably decentralise power in China—we will see rising incomes flowing into, not just agriculture, but, as we have heard, services and other consumer goods. That decentralisation of power, which I think is an inevitable part of the development of a service economy, will be good for China and good for us. It will lead to massive increases in imports, not just of our products, but of our expertise, of our services, of our capabilities, of our knowledge, and that is a great opportunity for us.

I was privileged only a few years ago to do a piece of work sponsored by the ANZ bank looking at how financial services would be transformed by the growth of the Chinese economy. One of the absolutely stunning numbers, which was incontrovertible when you worked it through, was that Chinese capital markets have to increase something like 10 fold in the coming decades to meet the change in the financial flows. That is an absolutely inevitable part of the next stage of their development. They need to develop sophisticated equity capital markets and sophisticated debt markets, and all of the expertise necessary to do that is right here in this country. We can be a fundamental part of that. Australians are all over Asia now in financial services—in Singapore, in Hong Kong and in China—and I have no doubt that Australians will be absolutely fundamental in providing the capabilities and expertise necessary for that sector to develop in China.

Within that context we have this free trade agreement. We export $107 billion of product from Australia, much of which is taxed, and we import $52 billion, again much of which is taxed. Those exports have been growing at 19 per cent a year. That is an absolutely astronomical number. Any delay to this agreement, as we know, would have been very expensive for those exporters. We are behind Chile and New Zealand and we will fall behind the USA, Canada and the EU as the Chinese move from small-country free trade agreements to larger country free trade agreements. We are in the right place at the right time to get on with this.

The breadth and depth of this agreement is really striking. On entry into force, 85 per cent of our exports will be tariff-free and, once fully implemented, 95 per cent of our exports will be tariff-free. Of great interest to me, of course, is agriculture. There are $9 billion of exports. The beef industry will gain $270 million within a decade. We are already seeing massive growth in meat exports in China. Almonds and macadamia nuts will see the elimination of 24 per cent tariff. We are already seeing 14,000 new hectares of almonds in place. Dairy, which I mentioned earlier, will see great benefits. The Lion cheese factory in Burnie invested $150 million in preparation for Asian markets. I see one of my colleagues here from Tasmania. What a wonderful thing: we are seeing jobs and investment already in anticipation of the growth of those markets.

Central to this free trade agreement is our ability to better control and market our product. At the moment, much of our product is going to China—let's face it, through grey markets, through Hong Kong and other countries—but we cannot control where that product goes, we cannot control how it is branded and we cannot control how it is marketed, and there will be great benefits flowing from that. In resources, in energy and in services, I have already talked about seeing extraordinary benefits. I am very confident that, if we do the hard work necessary to knock down not just the trade barriers, the tariff barriers, but the nontariff barriers, those benefits will flow thick and fast. The relationship will deepen and, in 20 years, when Paul Kelly or George Megalogenis are writing about how Philip Ruddock is staying for just one more term, they will be writing about the pivotal change that happened in Australia in 2015 when both sides of the House agreed to enter this free trade agreement.

Before I finish, I want to make a comment about one of the more difficult parts of this agreement that has caused some controversy and of course has been subject to a very aggressive campaign from some of the unions. The truth of the matter is that no-one in this place, as far as I know, is disputing a very simple principle: when it comes to jobs Australians come first, and when foreign workers come here they must have the skills to do the job. No-one is disputing that. Both sides of the House are in absolutely furious agreement on that. We must prioritise Australians above foreign workers and we must satisfy ourselves that, when we are short of a skill set, those coming in have the necessary skills to do the job.

The debate here is about the method: what safeguards work and what do not. The truth is that many of the safeguards that are being debated at the moment are ineffective. I will take labour market testing as an example. Let us be clear that labour market testing is a term of art. It describes putting an ad in the paper to see if anyone responds. But any employer in this modern era knows that that is one of the least effective ways of finding employees. In fact, regardless of the China-Australia Free Trade Agreement, under the Migration Act it is required that if an employer wants to bring someone in under a 457 visa they or others must have previously demonstrated that there is a skills shortage and the only way we can meet that skills shortage is to bring in workers from offshore. There is labour market testing, in the broadest sense of the term. Whether or not an ad in the newspaper is a necessary way of showing this is a matter that is subject to dispute. In fact, only last year we heard from an independent review by John Azarias and others that they felt very strongly that labour market testing, as defined in the 457 legislation and as I have described it, is not effective as a way of ensuring that we are putting Australians first. I welcome the fact that those opposite are working with us on this agreement, and I welcome the fact that we can have an open and sensible debate with them about what safeguards are necessary, but as part of that debate I do think it is very important to look at the facts on what the current safeguards do and do not do.

The other part of this that has caused some controversy—and we heard this from the previous speaker—is the ISDS system. Let us be clear that the investor-state dispute mechanism in this agreement has many carve-outs. It has carve-outs for environmental regulation, public welfare, health, culture and foreign investment screening. The Philip Morris case, which we just heard about, would not have been possible under this agreement. On top of that, in order for the investor-state dispute mechanism to come into effect under this agreement, it must be discriminatory. So the carve-outs are significant, they are far-reaching and they will all be reviewed in three years' time, with a view to establishing a more-modern ISDS system. This is a pretty primitive one. It is one that frankly gives little power and influence to anyone who may be concerned about the actions of the Australian government.

This is a profound agreement. I am very confident that in 20 years' time we will be looking back at 2015 and this time in government and we will be remembering the member for North Sydney's speech on the age of entitlement. But most of all we will remember the profound impact of the China-Australia Free Trade Agreement, the Korea-Australia Free Trade Agreement and the Japan-Australia Free Trade Agreement and, hopefully, the TPP, an Indian free trade agreement and many others. I commend the bill to the House.