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Monday, 9 August 2004
Page: 25853


Senator LUDWIG (12:30 PM) —I am continuing my speech in the second reading debate on the US Free Trade Agreement Implementation Bill 2004 and the US Free Trade Agreement Implementation (Customs Tariff) Bill 2004. The national interest analysis, which was done by the Joint Standing Committee on Treaties—JSCOT—in report No. 61 informs us that the free trade agreement is `GATT plus'; that is, it will remove almost all barriers to Australia's export of goods to the US through a negotiation of offer and request. The way it works is that it will provide an agreed list of exceptions to which obligations of the FTA do not apply. The result of the free trade agreement, it is stated, will be to increase market access. It is argued, both in JSCOT's report No. 61 and in the later report of the Senate Select Committee on a Free Trade Agreement between Australia and the United States of America, that the free trade agreement will bring significant economic gains to Australia. Just how big those economic gains will be—as I stated last Thursday—is still in contention. I suspect that we will have to wait to see the conclusion to that debate.

The point that should be made about this debate is that we are not arguing about minuses but about the magnitude of the gains that will accrue from the free trade agreement. Unfortunately, the national interest analysis which accompanied the treaty did not contain any specific financial information on costs and benefits. The only such information provided to the JSCOT was an estimate by Treasury of the cost of the agreement. Mr Acting Deputy President Marshall, I note that you are a member of that committee. The Treasury, through the NIA process, made available economic modelling to that committee in a report by the Centre for International Economics. This report showed a variance in the gains that may accrue through the FTA—one from a high base to an even higher base.

One of the most notable benefits that will accrue from the FTA is investment liber-alisation. However, investment liberalisation could have been implemented in a unilateral action by government decision. It is one of the issues that came up in negotiations on the free trade agreement with Singapore. Investment liberalisation will increase the threshold for foreign investors from $50 million to $800 million—a significant change. The reports by JSCOT and the Senate select committee illuminate this issue.

In addition to the economic modelling that was provided to JSCOT, the committee was also fortunate enough to receive the Dee report, which was then used extensively by the select committee. The Dee report became available towards the end of that inquiry and identified modest gains to be gained from the FTA. Notably, the Productivity Commission was not called on to analyse the FTA. This was an omission, or an oversight, by this government that should have been corrected. It can still be corrected by allowing the Productivity Commission to take up the cudgels and do the job that it does best—analysing economic models and matters such as the free trade agreement. It could provide some future information to both the government and the opposition about how the FTA will proceed.

It became transparent throughout the process that the government had not undertaken rigorous examination or engaged in consultative rounds with the states and with its own stakeholders, which I think is an oversight that the government could have corrected. It could have ensured that the states were brought on board more. The JSCOT report comments on the lack of consultation by the government with respect to the free trade agreement.

The FTA is a living agreement. It does not just finish, as does the construction of a house. There will be ongoing dialogue with the US—and there will be ongoing dialogue, I suspect, in this chamber—about how the FTA will continue. There will also be a significant joint committee to supervise the operations of the agreement. This committee will play a central role in how the FTA will unfold. The committee will meet annually and review the current functioning of the agreement. It may consider any improvements or amendments, clarify issues and issue interpretations, and it becomes part of the initial stages of any dispute resolution process that may be called for.

Another important consideration is that the agreement does not allow private investors to directly challenge government decisions. It remains a government-to-government document. Individual investors are of course able to raise concerns about their treatment with their respective governments, but what will emerge is a functioning, flexible trade agreement. That clearly will not suit all who want clarity, certainty and a document with a black-and-white approach. This is not one of those. However, I think it is best to refer to this statement made by Ms Meg MacDonald during the JSCOT hearings:

We think that the various forums and mechanisms established under the agreement ... will be able to continue the work of streamlining the bilateral business environment ...

Turning for a moment to the technical detail, for the free trade agreement to come into force both parties will need to fulfil their domestic approval processes. These processes include amending or agreeing to legislation and accepting an agreed date of introduction of the agreement. These two bills before the Senate today are part of the process which will enable the free trade agreement to come into being.

One of the major sticking points at the moment, which is quite a live issue in the Senate, is the pharmaceutical debate. The DFAT fact sheet says that the annex will:

... provide more opportunities for companies seeking listing of new medicines on the PBS to have input to the process.

That has caused a significant amount of debate. It is clear that no-one wants to either directly or indirectly undermine our Pharmaceutical Benefits Scheme. At least, I am confident the opposition take that view; I am not sure all the government ministers take that approach. The question can be formulated in this fashion: will the free trade agreement either directly or indirectly undermine the Australian PBS system?

The analysis undertaken by JSCOT examined each individual issue. JSCOT heard `no compelling evidence' that the agreement would affect prices of medicines, that the review mechanism would affect the PBS, that patent issues would weaken the PBS, that the establishment of a working group could undermine the PBS or even that the behaviour of US pharmaceutical companies could potentially undermine the PBS. On the issues separated and dealt with individually they came to the reported conclusion—if it can be called a conclusion—that there would be no tangible effect on the PBS. However, if you look collectively at the individual statements that are contained in report No. 61 by JSCOT and in the report of the subsequent select committee, you will see that there remains a concern. I think that that concern can be addressed by Labor's amendment.

Before I look more at the PBS, I want to comment briefly on Labor's approach. Over the last several days we have seen the validation of Labor's approach to the free trade agreement with the United States. It is a complex document with more than 1,100 pages and a considerable amount of detail included. Labor said at the beginning of this year that we owed it to the Australian people to examine it. My email account is, and was, overflowing with views from the elderly, the young, the sick and those who have to care for them. In fact, in the last four days over 900 emails have been received in my inbox. Labor's commitment to using the Senate—that is, through the select committee—for its intended purpose as a house of review to examine the agreement is borne out by that process. Since announcing our intention to put up two amendments—that is, the local content amendment and the PBS amendment—I have received further encouragement from people in my state of Queensland.

The Prime Minister calls this `a once-in-a-lifetime opportunity—a chance to open trade'. Irrespective of the once-in-a-lifetime tag, I think we owe it to the Australian people to let them have their say about the FTA. That stands as the hallmark of what Mr Latham outlined when he first took the approach he did in respect of the FTA. He said that the select committee should be allowed to do its work—to examine the FTA, to build on the work the JSCOT committee had done to ensure that the FTA was properly scrutinised. The opposition forced the government to put its touted FTA under the spotlight. Frankly, I think it was a worthwhile and necessary process. Considering the length of time it took the Howard government to deliver all of the information about the FTA to the select committee, they have done remarkably well in the time available to produce their comprehensive report.

Two issues remain outstanding. One of them has, I think, been resolved by the government agreeing with us. The second is in relation to the PBS. The interesting fact about that is that the final appeal mechanism for the PBS was delivered to the public arena no earlier than two weeks ago. It could have been delivered earlier. The government could have provided information on how the system was going to work, given the comments made originally in the treaties report and the subsequent comments by the select committee.

The process requires generic manufacturers to do two things: firstly, certify that they do not infringe any existing patent; and, secondly, certify that they have notified the patent holder of their intention to seek listing on the PBS. This notification requirement could allow patent holders to consider whether to take early pre-emptive action against a generic manufacturer. There might be issues surrounding that as to whether or not they would and whether or not it is similar to the US legislation. But what we have to concentrate on is ensuring that the PBS in Australia is sound and continues to deliver affordable medicine to people.

In contrast to the government, Labor was determined to get it right. The government has failed the Australian people in not ensuring that the PBS was solid. The Prime Minister made disparaging remarks about the select committee and the process Labor undertook to ensure that the FTA was properly scrutinised and that all the issues were examined and considered. However, given that the Prime Minister has already conceded that we had a valid viewpoint on the question of cultural content, I think he should reconsider the issues and his words about the PBS as well.

Today, I expect we will see the opposition's amendment to the PBS but that is not a matter I will talk about during the second reading debate. In my view, it would have been far better if the government had last week joined with Labor and said, `Yes, there are issues; there is a problem and we need to address it,' rather than to continue over the weekend to create doubt that otherwise might not have arisen.

In relation to these two amendments and these two issues, the government would not have looked at Australian content if it were not for the Australian Labor Party; nor would they have looked at ensuring the continuation of a strong PBS if it had not been for Labor. In conclusion, over the weekend Labor and the government have had a chance to spar about these issues. I think it is high time now that we took these issues to a conclusion and that the government got on with it.