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Monday, 22 September 2014
Page: 10140


Mr WATTS (Gellibrand) (17:58): I would like to thank both the committee secretariat and the deputy chair for their work on the majority and dissenting reports on the Korean free trade agreement. I think they are both worthy documents that grapple with complex and contentious issues. I am a free trader and I am proud of Labor's record in promoting free trade. We established trade relationships with China, now our biggest trading partner, under the Whitlam government. We drove through Australia's biggest tariff cuts, often unilaterally, under the Whitlam, Hawke and Keating governments. We provided international leadership on tariff reduction for agricultural products during the GATT and in the WTO through the Cairns Group. We provided crucial leadership for the establishment of the annual APEC leaders meeting, a crucial forum for pushing the cause of free trade in our region, and the Bogor declaration on trade liberalisation in our region.

This is a proud record—a record of leadership. Unfortunately, the cause of free trade has stalled. The progress of multilateral trade agreements through the WTO has been extremely slow of late. As such, by necessity, increasing attention has been given in recent years to the second and third best options of regional trade agreements and bilateral trade agreements.

A Korea-Australia Free Trade Agreement comes before us today in this context. It delivers worthy but hardly revolutionary tariff reductions and market-access gains. Against these benefits we are left to ponder the cost of trade diversion, new intellectual property obligations and the introduction of an investor-state dispute settlement mechanisms. In this context, I want to add a few additional comments, here today, to the contents of the majority report.

The majority report raises a number of concerns about the adequacy of the treaty-making process. I want to particularly echo the views of those stakeholders who have complained about of the adequacy of DFAT's consultation process on agreements like this. I had first-hand experience of this process before coming to this place and, in my experience, these consultations are a one-way street in which DFAT does not engage with the substance of industry submissions.

It may be that DFAT is more forthcoming with stakeholders with more traditional trade-law concerns. But when DFAT is asked to engage with the complex implications of changes to intellectual property law on industry, engaging with DFAT's consultation process feels like talking to a black hole, where submissions and representations are made but very little of substance ever comes back in the other direction.

It was clear from this inquiry that the overall level of satisfaction with DFAT's consultation process, particularly within the technology and intellectual property sector, is extremely low. With respect to intellectual property, I am pleased that the majority report notes the need for a 'less prescriptive' approach to IP and trade agreements and notes concerns over 'lack of recognition' of the broader public interest in the IP provisions of KAFTA. I also commend the dissenting report's more forthright coverage of copyright issues and largely agree with the substance of this section of the dissenting report.

In my first speech in this place I argued for an approach to intellectual property based on incentives for creators. I warned that at present:

… policymakers continue to view intellectual property as little more than an innate property right to be unthinkingly protected by government. This orthodoxy is buttressed by trade agreements, often negotiated without transparency or democratic accountability, that, instead of promoting free trade, are increasingly providing the expansion of private statutory monopolies.

I am opposed to the unthinking expansion of IP for the same reason that I support free trade. I believe that competition improves price, quality and diversity of products available to consumers and that monopolies, whether created by trade barriers or legislation, are generally not in the consumer interest.

There ought to be a clear weighing of costs and benefits before we go about expanding the scope of a private statutory monopoly, particularly one via the one-way ratchet of a trade agreement. Unfortunately, this treaty is another example of the unthinking expansion of intellectual property rights that I warned against in my first speech. The IP section of the KAFTA treaty is also one of the more mendacious examples of policy laundering that I have seen in recent times. The consultation attachment of the National Interest Analysis of the KAFTA provides:

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 due to the High Court’s decision in Roadshow Films Pty Ltd v iiNet Ltd, which found that ISPs are not liable for authorising the infringements of subscribers.

This characterisation is frankly wrong at law.

The High Court's decision on Roadshow Films and iiNet did not find 'ISPs are not liable for authorising the infringements of subscribers', it simply found that a lower court's decision that—given the facts of that case—iiNet fell within the protection of the Copyright Act's safe-harbour provisions was correct at law.

I asked DFAT how the government had formed this erroneous legal view. In an answer provided on notice, DFAT implicitly accepted the error in this characterisation of the iiNet decision, noting:

At the time that the AUSFTA and the SAFTA were implemented, the Government’s view was that Australia complied with this obligation through technology neutral ‘authorisation liability’ provisions contained in sections 36 and 101 of the Copyright Act 1968. However, the High Court’s decision in Roadshow Films Pty Ltd v iiNet Ltd, substantially limited the circumstances in which ISPs will be found liable for authorising the infringements of subscribers.

So, between the NIA and this response from DFAT, we have moved from the iiNet decision finding that ISPs are not liable for authorising infringements to a statement that the decision 'substantially limited the circumstances in which ISPs will be found liable'. This is somewhat better but still not an accurate characterisation of the decision. The High Court's decision did not change anyone's legal rights or obligations. It merely confirmed the scope of these obligations, as understood by the industry for more than a decade, given a particular fact set.

The House should be under no illusions, the terms of the authorisation liability safe harbour provisions have not changed in law since the implementation of the Australia-US Free-Trade Agreement. What is really going on here is what trade law commentators have recently begun describing as 'policy laundering'. That is the use of trade obligations—or in this case a bizarre interpretation of our trade obligations—to circumvent democratic debate of the merits of a policy initiative. The same DFAT answer I was citing earlier went on to say that this situation 'gives rise to some risk that Australia could be perceived as not fully complying with this obligation. In light of this decision, the government has formed the view that it would be prudent to minimise the risk'.

Let us be clear about what the government is saying here. The Attorney-General's Department has decided unilaterally that there is a 'risk' that Australia could be 'perceived' as being noncompliant with its obligations. It has done so without correspondence or prompting from the United States government. It has done so apparently without consideration for whether this view ought to be tested legally. No regard seems to be had for the idea that, even if we were perceived as being noncompliant, this position would be worth testing through the dispute resolution processes of the Australia-US Free Trade Agreement. It has formed this view without any of the usual public or industry consultation that you would expect before making such a major policy decision. Finally, it formed this view based on a mistaken reading of the High Court's decision in iiNet. This is simply a subversion of democratic accountability. If the government wants to reform Australia's Copyright Act, it should make the argument for this change on the merits, not by hiding behind the flimsy claim that we cannot even debate the issue because of our trade obligations.

The IP provisions of this agreement are also troubling, as there has been absolutely no effort to estimate the costs and benefits of these changes to Australian law. While the DFAT secretary's certification letter for the KAFTA RIS states that the RIS draws on 'independent economic modelling of the impacts of the options of proceeding with or not proceeding with the KAFTA', it was confirmed in response to questions put to DFAT that none of the economic modelling done to justify the benefits of this agreement even considered the impact of the IP provisions of this agreement. We know from experience with the Australia-US Free Trade Agreement that these provisions can often have the largest economic impacts in agreements of this kind, and the failure to attempt to measure these costs and benefits is another failure of transparency and democratic accountability.

In this respect I am pleased that the committee report notes the recommendation of the Productivity Commission's report Bilateral and regional trade agreements that the costs and benefits of changes to IP provisions should be modelled on a stand-alone basis so that they can be assessed against the broader benefits of reducing trade barriers and market access. Given the concerns identified in the majority report about the transparency of these agreements and the inclusion of IP provisions in these agreements, this kind of modelling might usefully increase public confidence in the merits of future agreements. I am pleased to see that this recommendation was picked up by government senators, and I look forward to the government adopting this recommendation before future agreements, like the Trans-Pacific Partnership Agreement, are provided to the JSCOT.

Finally, I want to say a few words about investor-state dispute settlement. The majority report notes the 'unintended consequences' of these agreements and notes that there is 'reason for concern' with respect to these provisions. It recommends that the government exercise a 'cautious approach' regarding the inclusion of ISDS provisions in upcoming FTAs. While DFAT indicated that Korea would not have agreed to finalise KAFTA without the inclusion of an ISDS mechanism, from the evidence heard by the committee the provision included in this agreement appears to be seriously problematic. It is true that Australia is already a party to more than 20 trade agreements that include an ISDS provision of some kind. As such we are already exposed to the risks and costs of try-on litigation by no-hopers unhappy with government policy decisions, such as we are currently seeing with respect to plain-packaged-tobacco legislation. However, that is no reason in itself to expand the scope of this risk for our nation. ISDS provisions of this kind deserve more scrutiny and more debate in this place and in the broader community. The issue ought to be given greater consideration and debate before the implementation of this agreement and subsequent regional and bilateral trade agreements.