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Joint Standing Committee on Treaties
07/05/2018
Comprehensive and progressive agreement for trans-Pacific partnership, Peru-Australia free trade agreement, European Union framework agreement; Timor treaty on maritime boundaries

DIAS, Mr Todd, Assistant Director, FTA Services Branch, Department of Foreign Affairs and Trade

DOUGHTY, Ms Nicole, Trade Policy Officer, Department of Foreign Affairs and Trade

INNES, Ms Helen, Branch Manager, Migration Policy Branch, Small Business and Economic Strategy Group, Department of Jobs and Small Business

JORY, Mr Andrew, Assistant Secretary, Department of Foreign Affairs and Trade, Office of Trade Negotiations

SCHOFIELD, Mr Paul Andre, Director, Investment and Services Law Section, Department of Foreign Affairs and Trade

WILLARD, Mr Michael, Assistant Secretary, Global Mobility Branch, Immigration, Citizenship and Multicultural Policy Division, Department of Home Affairs

WORRELL, Mr Matthew, Assistant Secretary, Multilateral Trade Policy and Bilateral Branch, Trade and Market Access Division, Department of Agriculture and Water Resources

[10:56]

Peru Free Trade Agreement

CHAIR: The committee will now take evidence on the free trade agreement between Australia and the Republic of Peru, an agreement to terminate the agreement between Australia and the Republic of Peru, and the promotion and protection of investment. I welcome representatives from the Department of Foreign Affairs and Trade, and every other government department.

Although the committee does not require you to give evidence under oath, I should advise you the hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as contempt. The evidence given today will be recorded by Hansard and attracts privilege. Mr Jory, I now invite you to make a brief opening statement before we proceed to a wider committee discussion.

Mr Jory : Thank you very much. In this opening statement, I'd like to take the opportunity to briefly outline some of the benefits of the Peru-Australia Free Trade Agreement—or PAFTA, as it's known. There are four key themes of this free trade agreement: access for Australia to one of the world's fastest-growing economies; in particular, access for agricultural and manufacturing products—without an FTA we would not gain access to those particular markets; wins for Australian education providers with Peru recognising Australian degrees; and also a focus on mining and the whole Australian mining supply chain, given the large investment of Australian mining companies in Peru's mining sector. Negotiations for an Australia-Peru bilateral FTA were launched on 24 May 2017. The Prime Minister announced the conclusion of negotiations on 10 November, and on 12 February the agreement was signed by Minister Ciobo and Minister Ferreyros from Peru. It was tabled in parliament on 26 March.

Peru is a growing market with immense potential for Australia. Peru showed signs that it was eager to strike a deal quickly with Australia following the removal or the withdrawal of the United States from the original TPP 12 agreement. The decision to launch was made on the understanding that we would be able to quickly reach a deal that captured the benefits of the TPP while differing in certain respects so as to better reflect our bilateral relationship. To give some idea of the size of Peru's economy and the value of the market for Australian exporters, I'd like to provide some facts and figures on Peru's economy. Peru has a lot in common with Asian economies to which Australian exporters are very well known. For example, Peru's GDP of US$215 billion is comparable to that of Vietnam's, with $220 billion. Its population of 31 million is very similar to that of Malaysia's 32 million.

On any measure, it's been one of the region's and world's fastest-growing economies since 2000, with average annual GDP growth of over five per cent. Crucially, much of this growth is being driven by consumption and investment. Economic reform in Peru has led to strong growth in employment, a sharp decline in poverty and the expansion of Peru's middle class. This emerging middle class demands high-quality goods and services, especially the kind which Australia provides, such as safe, high-quality food products, world-class education services and expertise in mining equipment, technology and services.

In 2016-17, total two-way trade in goods and services with Peru was worth $646 million, up 18.9 per cent from the previous year. Australian exports of goods and services were valued at $122 million in that same period. These modest figures reflect the fact that, up until now, Australian businesses have effectively been locked out of Peru's market. The tariffs Peru applies to Australian products range from nine per cent to 29 per cent, and this covers many of our key export strengths like dairy, beef, grain, sheepmeat, sugar, wine, pharmaceuticals, manufactures, medical devices, paper products, iron and steel. At the same time, our main competitors of these products—the United States, Canada and the European Union—have an advantage over Australian exporters because they have free trade agreements with Peru.

In particular, market access outcomes on goods in general terms were far superior to what Australia was able to achieve in the TPP. This was because of the different bilateral relationship that we had with Peru in this particular agreement, so we were able to gain better market access across those priority items—sugar; dairy; wheat; rice; sorghum; wine; wool; cotton; a range of manufactures, including iron and steel; paper products; pharmaceutical devices; medical devices; and pharmaceutical products.

Our bilateral FTA with Peru will eliminate 99.4 per cent of tariffs that Australian exporters face into Peru. That means that, once PAFTA is in force, Australians will be able to compete in Peru on a level playing field with our foreign competitors. I'll give one example of how this will benefit Australian businesses. The US agriculture department has estimated that beef consumption in Peru per person per year will rise from seven kilos in 2014 to 20 kilos in 2020 as a result of the growing middle class and greater wealth in that country. Under PAFTA, Peru agreed to eliminate its beef tariffs—currently up to 17 per cent—within five years. This means that, if PAFTA enters into force by the end of this year, our farmers will be able to export beef to Peru on the same terms as US farmers, even though the US-Peru Free Trade Agreement entered into force over nine years ago.

FTAs aren't just about goods. PAFTA is one of our most ambitious FTAs on services trade. It opens up new opportunities for Australian service providers. In particular, one of the key outcomes was Peru recognising Australian degrees. It also creates a more predictable and transparent environment for Australian investors in Peru and provides adequate safeguards to ensure that the government retains the ability to regulate in the public interest. Many of these gains would not have been possible without a free trade agreement. Peru previously have looked to the United States, Canada or the EU for certain services. Under PAFTA, Australian businesses will have the chance to fit that demand.

PAFTA negotiations took place within a very short time frame and used minimal resources. It was concluded in just three rounds, which took place over a period of four months, with a team that generally consisted of no more than 15 people. This was possible because we capitalised on our shared negotiating history in the TPP. We were already familiar with each other's systems and could cut to the chase, so to speak. We didn't need to re-litigate sensitive or contentious issues. To its credit, Peru indicated very clearly that they wanted an agreement with Australia swiftly. In addition, negotiating bilaterally meant we were entirely focused on what we could achieve with Peru as opposed to plurilateral negotiations, which is where we can be focused on other markets and other priorities. All this enabled us to obtain outcomes that were in many regards TPP-plus outcomes—for example, some of the goods market access outcomes that I've outlined.

The Australian economy relies on exports, and we can't afford to be complacent about new market opportunities and new sources of economic growth. PAFTA will help Australia's exporters diversify into new, non-traditional and valuable markets, and as a result the opportunities for Australia in Peru will continue to grow not only in the near future but for decades as well.

Thank you for the opportunity to make these opening remarks. I am pleased to answer any questions that the committee might have.

CHAIR: Thank you. What are the differences between the trade outcomes under TPP-11 and under PAFTA? For example, is PAFTA needed, or does TPP-11 cover it? Is PAFTA head and tail above the market access in TPP-11?

Mr Jory : I was one of Australia's lead market access negotiators in the TPP in addition to being Australia's chief negotiator on PAFTA. I can say that what we got on goods market access was significantly better than what we were able to achieve in the TPP. In particular, we got quota access for sugar, for dairy, for rice and for sorghum, and that was access that we were not able to achieve under the TPP. For many other products, particularly Australia's trade priorities, we got much faster phase-outs than we were able to get, so the period of time in which the tariff was eliminated was much faster in Peru compared with the TPP. For example, in the TPP beef cuts going into Peru were phased out within 11 years. In the Peru-Australia FTA they're phased out within five years. Some of the longer phasing periods that, in particular, applied for Australian exports such as pharmaceuticals and medical devices, faced a range of phase-out periods of six years, 11 years or 16 years. Those products are now being eliminated on entry into force. They are some examples of how we achieve better market access under Peru.

Ms TEMPLEMAN: As an Australian exporter, won't this make it confusing to have TPP-11 and this one? Peru is also involved in the Pacific Alliance trade negotiations. How is that not confusing for an exporter to determine what the best pathway is?

CHAIR: Can you rephrase? That is asking for an opinion. I know where you're heading.

Ms TEMPLEMAN: What are the practical impediments that exporters are going to find that you've identified given that there will be confusion about the potentially three agreements?

Mr Jory : It's not unusual for Australia to have multiple free trade agreements with the same partner. With Malaysia, for example, we have two arrangements. With Japan we also have two arrangements. Essentially, we are trying to put in place rules that are easier for businesses to use. I think that, in TPP and in Peru-Australia Free Trade Agreement, the rules of origin for many products are quite similar because we were using the TPP template. However, I think that, in general terms, the rules of origin, because they are shaped by only two parties in the Peru-Australia FTA, better reflect our bilateral interests than does the TPP, which reflects the interests of 11 parties in that particular case. So I think that we have negotiated rules that reflect business interests.

In conjunction with Austrade, the department has a range of tools to try to help traders navigate these different rules of origin. We have the FTA portal, in which a trader can look up which particular market they want to export to, and that can provide information about the tariff that they would need to apply and also about the applicable rule of origin. With these modern free trade agreements, we're very much trying to do product-specific rules—that is, a particular rule for a particular product. We work very closely with industry groups and with exporters when we're developing those rules to try to make sure that we're as close to the export profile of Australian exporters as possible.

Ms TEMPLEMAN: So you'd argue that, while there might be some confusion, there are benefits in those three separate agreements? And I'm right in thinking there's potentially going to be a third agreement.

Mr Jory : I think that, when you look at what traders face, you see that traders face a range of applicable standards. Some of those standards come from the WTO system. Many of what we call technical barriers to trade and sanitary or phytosanitary standards are set by the WTO system. There will be tariffs. There will be a rule of origin that is needed to meet that particular tariff if it's under a free trade agreement. There could be technical standards. And so, essentially, with the system as it is at the moment, either you have a free trade agreement, which can provide an expedited process, or arguably an easier process than some of those WTO processes and one which can still apply or is clarified through a free trade agreement process. I think there are many factors that an exporter has to take into account, and there is a range of tools that the government and the department has to try to help exporters navigate those particular questions.

Ms TEMPLEMAN: Thank you.

Mr WALLACE: The current arrangement between Australia and Peru is a 1995 bilateral agreement. Is that correct?

Mr Jory : There's an investment protection agreement which exists between Australia and Peru. I think the date might be 1997, but I can check. It was signed in 1995 and entered into force in 1997.

Mr WALLACE: Thank you. Can you describe or explain the advantages in this new PAFTA as opposed to the old one, particularly in relation to safeguards that are around ISDS?

Mr Jory : The agreement that we have in place with Peru—the investment protection and promotion bilateral treaty—only relates to investment. It doesn't relate to any of the other aspects that we're talking about in terms of goods trade or services trade. In relation to the safeguards that we have included in investor-state dispute settlement, there is a range of safeguards. There's a broad safeguard that applies for any measures that are taken for public purposes. That can be measures taken for the environment, measures taken for public health or measures taken for education. That's not included in the 1997 agreement.

There's also a range of procedural safeguards that are not included. Hearings have to be made in public. The submission process is in public. It is trying to bring a greater degree of transparency around any possible investor-state dispute settlement that could occur. There are also specific carve-outs for elements of Australia's public health regime, including the Medicare Benefits Scheme, the Pharmaceutical Benefits Scheme and a range of others. There's a list of safeguards that were just not included or not contemplated at the time of the 1997 agreement that are included.

Mr WALLACE: On the education side of things, there's a recognition of Australian degrees in Peru under PAFTA. Is there a quid pro quo there? I note that Australian universities will have access to the Peru market, presumably to be able to set up shop in Peru. Is there a quid pro quo to that? Will a Peru university be able to set up in Australia?

Mr Jory : Peru has agreed to recognise Australian degrees. Australia has not agreed to recognise Peruvian degrees. Basically, Australia always, in its services commitments in relation to that form of higher education—university education—has a carveout. We don't make commitments on university education, but Peru has agreed to recognise university degrees.

Mr Dias : Just to clarify, we don't make commitments in our trade agreements to recognise other countries degrees. We have different systems. In relation to the second part of your question, about the ability to establish a university in Australia, in that regard we do make commitments. We have commitments to allow foreign universities to establish under the same rules and requirements that we have for Australian universities. We make those commitments, precisely as you pointed out, because we want our universities to have the same opportunities overseas—in this case, in Peru.

Mr WALLACE: So the answer is yes?

Mr Dias : Yes for the establishment of universities, but no for recognition.

Mr WALLACE: Does the rule for the recognition of university degrees apply in respect of trade qualifications?

Mr Jory : It's a different commitment contained in a different part of the agreement. Essentially, the commitments that are made on recognition of degrees are contained in a side letter, whereas the commitments that are contained on the extent to which Australia would or would not recognise a particular qualification or in terms of a temporary worker are contained in the chapter on movement of temporary persons or labour market testing.

Mr Dias : I think what you're getting at here is the temporary entry issue, in terms of recognition of qualifications or experience for foreign workers coming into Australia temporarily. Like the TPP—I think you heard this morning a readout of some of the article language in relation to qualifications—we have the same language in PAFTA. What that means is that the system today for a Peruvian tradesperson—

Mr WALLACE: Electrician was the example that Senator Keneally used.

Mr Dias : Whatever the requirements are for the skills or qualifications of a Peruvian electrician coming to Australia today to be recognised will be exactly what happens when PAFTA enters into force, because there is nothing in the agreement that requires us to change our system in relation to the recognition of those qualifications or skills.

Mr WALLACE: So if a Peruvian electrician has the opportunity to work on a Melbourne building site, what tests or otherwise do we use to identify that this Peruvian electrician is up to scratch?

Mr Dias : It would be the same tests that apply today.

Mr WALLACE: What does that mean?

Mr Dias : I don't implement the visa system in relation to the qualifications. What I'm saying is that the treaty itself does not change anything.

CHAIR: Is there anyone here who sits in this space professionally?

Mr Willard : I can speak in respect of the visa system. The rule is that someone coming in to undertake a role that requires licensing, registration or membership of a professional organisation would need to demonstrate that they can meet the requirements for licensing, registration or—

Mr WALLACE: How would they demonstrate that?

Mr Willard : At a trades level, they often need to be licensed at a state level. A doctor, for example—

Mr WALLACE: Let's just stick with the example of the—

CHAIR: Let me interrupt for one second. This actually is not a trade issue; it's a visa issue.

Senator KENEALLY: But it's part of the trade agreement.

CHAIR: The trade agreement makes no change at all to existing visa conditions. Is that correct?

Mr Dias : In relation to the requirements for people to demonstrate their skills and experience there is no change.

CHAIR: No change at all. Therefore, it is a visa issue, not a trade issue.

Mr JOSH WILSON: But, Chair, by means of these agreements—as much as we're talking about recognising degrees from other countries—through trade agreements we agree that we are going to take whatever happens to be the electrical trades qualification in another country as meeting that global test—

Senator KENEALLY: To be equivalent.

Mr JOSH WILSON: Once we've done that through an FTA, it then conforms to the existing visa requirements.

CHAIR: What I think we might do is: Secretary, can you write to whoever is specifically responsible in government to answer this question and we'll get an official answer from government, as opposed to our dear trade officials, who actually don't—

Senator IAN MACDONALD: It hasn't changed.

CHAIR: That's right, but the committee has a right to ask the question. It's been asked. Let's get the answer from whoever the expert in government is, rather than our trade officials doing their best.

Mr WALLACE: Thanks, Chair, that's all I have, thank you.

CHAIR: Are you happy with that, Senator Keneally and Mr Wilson?

Senator KENEALLY: Thank you, Chair.

Mr JOSH WILSON: Thank you, Mr Jory. Is there any economic analysis, independent—preferably—or otherwise, on the specific economic impact/benefits in relation to PAFTA?

Mr Jory : Do you mean modelling?

CHAIR: Has there been any independent modelling conducted on the proposed benefits of the Peru trade agreement?

Mr Jory : Not that we're aware of.

Mr JOSH WILSON: So certainly not commissioned by or asked for by the department?

Mr Jory : No.

Mr JOSH WILSON: Anything on jobs specifically?

CHAIR: Any modelling on employment benefits that result from PAFTA?

Mr Jory : The Department has not commissioned any modelling on that question, as I said before.

Mr JOSH WILSON: On ISDS, just to be clear: is it right that the ISDS provisions in PAFTA are confined to the investment aspect of PAFTA? Is that what you were suggesting—that the broader goods and services trade stuff would be picked up by the ISDS provisions between ourselves and Peru contained in TPP-11?

Mr Jory : I can't talk about the TPP-11, but I can give you an answer in relation to Peru. The investor-state dispute settlement provisions in the PAFTA agreement apply to the investment obligations in the agreement. They don't apply to the 'Technical barriers to trade' chapter, for example, or matters outside of the 'Investment' chapter.

Mr JOSH WILSON: Is it specifically excluded in the 'Technical barriers to trade' chapter? It is in our Korea-Australia Free Trade Agreement. Is it specifically excluded in PAFTA?

Mr Jory : The investment obligations in relation to ISDS only apply in relation to the investment aspects of the treaty. Mr Schofield, are you able to elaborate on that?

Mr Schofield : I'd be happy to. The 'Investment' chapter of the PAFTA agreement explicitly sets out that ISDS claims can only be brought in relation to breaches of section A of chapter 8—the 'Investment' chapter—which sets out the various investment protections. There's no possibility of bringing an ISDS claim in relation to any other aspect of the agreement.

Mr JOSH WILSON: So, presumably, Peru or Peruvian companies would rely on the ISDS provisions in the TPP-11 to protect their broader interests, if they saw fit to do so. Is there a reason why tobacco is specifically part of the TPP-11 ISDS provisions but not the ISDS provisions in this agreement?

Mr Jory : I think there are two questions there. The first question is: is investment and the coverage of ISDS broader in TPP compared with the Peru-Australia Free Trade Agreement in terms of covering aspects outside of the 'Investment' chapter? I think we can take that on notice and give you an answer to that. The second question, as I understand it, is: why is there a specific mention of tobacco in TPP but not a specific mention of tobacco in Peru?

Mr JOSH WILSON: I just wanted that confirmed, really.

Mr Jory : Mr Schofield can provide some details, but there is a very broad public health carve-out in PAFTA, and it covers tobacco.

Mr JOSH WILSON: Well, we'll see. But it doesn't explicitly cover tobacco, whereas the TPP-11 does. I just wanted that confirmed.

Mr Schofield : I can address both those issues. Just to clarify: we're obviously not here to talk about TPP-11, but I wouldn't want the committee to have the sense that the TPP-11 ISDS mechanism covers goods. That's not the case. It's equally limited to section A of the 'Investment' chapter and covers, in part, financial services. In relation to your specific question on tobacco: we worked very closely with our Department of Health in relation to the carve-out on public health measures. As you know, in footnote 17, we have a specific carve-out for measures designed to promote or protect public health which is broad and would obviously include tobacco measures. It also covers the four pillar public health policies: PBS, Medicare, OGTR and Therapeutic Goods Administration.

Mr JOSH WILSON: I understand that. But this is the issue that's raised in relation to the TPP-11. People keep saying that we're not talking about that. The relationship between these agreements is entirely relevant to government, the Australian people and this committee. The fact that there are apparent inconsistencies between them is entirely relevant, and that's why I want to explore them. People are concerned about ISDS when they see inconsistencies. We're told that this is the cutting edge and that we're constantly updating ISDS provisions so they represent the cutting edge. When we've entered into two sets of them, in recent times, that actually have different terms, it's entirely proper that both this committee and the broader community asks: why is that? It does erode confidence. That's why I'm asking those questions.

Coming back to the Korea free trade agreement: my understanding is that it did explicitly put to one side the technical barriers to trade aspect of that agreement in relation to how ISDS would operate. I think that's relevant because—

CHAIR: Question, Mr Wilson?

Mr JOSH WILSON: Why was that the case in KAFTA and apparently not in PAFTA?

Mr Schofield : My understanding—and we can check this for you—is that in the Korea-Australia Free Trade Agreement there is a carve-out that relates to dispute settlement, but that is not referring to investor-state dispute settlement; it's referring to state-to-state dispute settlement. As no doubt you are aware, with free trade agreements we have two basic options: state-to-state dispute settlement, in relation to many areas of the agreement; and then, separately, ISDS in relation to the 'Investment' chapter. As I understand it, in the KAFTA context that you've brought to our attention, they're talking specifically there about state-to-state dispute settlement, not ISDS. I'm unaware of any of our agreements having an explicit carve-out for ISDS in TPT, because the issue just doesn't arise. By their definition, ISDS claims have to be made in relation to section A of the 'Investment' chapter, which sets out the obligations regarding investment.

CHAIR: Yes to taking on notice the difference between—

Mr JOSH WILSON: Yes, I'd appreciate it, because people raise the issue around building product standards and country-of-origin labelling, particularly, and other labelling in relation to alcohol and how that might arise in the future—and that seems to be partly covered by TPT provisions. I appreciate the distinction you make between state-to-state and investor-state dispute resolution—if that could be clarified—because that would be a meaningful difference.

CHAIR: Tremendous. Senator Macdonald.

Senator IAN MACDONALD: Again, can I start by congratulating you and your team on what you've done. In my electorate, beef, sugar and mining are such important areas, so this is a marvellous free trade agreement as far as we're concerned in Queensland. So, thank you very much. Again, Mr Wallace reciprocated by pinching my question! The fact that Peru will accept Australian university degrees and we don't accept theirs must've been—let me put it this way—rather a sensitive issue. Is it? It brings a suggestion about Peruvian universities. How did you manage that?

Mr Jory : I think that it's very clear that Peru is an economy that is growing very fast. They've had a series of macroeconomic reforms. They've been one of the most successful economies in the world in lifting people out of poverty. Their Gini coefficient, which measures how poor people are in that particular society, has been reduced at a faster rate than almost any other country in the world. So I think they see this FTA with Australia, with a developed economy, as a real asset for them. There are always areas that raise individual sensitivities in any trade negotiation on either side. But I think that they see this as a way of saying to the world that they can trade with a G20 economy and that there are opportunities for them in this free trade agreement in the same way that there are opportunities for our exporters or service providers, who potentially didn't have that access to the market.

I think the particular question of education was made a little bit easier by the fact that the Peruvian government has a scholarship scheme where they're looking to try to give scholarships for Peruvian students to study overseas and then return and work for the government, and Australia is one of the target countries in that particular model for their scholarships, so it's important for them as well that they recognise our degrees.

Senator IAN MACDONALD: You had a lot of questions about, perhaps, Peruvian tradesmen coming in and working in Australia and what their qualifications are. Again, how is that reciprocated? What about Australian electricians, boilermakers and tradesmen generally, who would be flooding, I would assume, into the mines in Peru? What does Peru require of their qualifications so far as Peru is concerned?

Mr Jory : I might ask Mr Dias if he wants to add some more detail to my answer, but I think that, in general terms, any Australian businessperson who was going over on a temporary work visa would still have to meet Peruvian standards, in the same way that Peruvians coming here also have to meet standards. There's a particular article in the agreement where, essentially, we agree that any standards or licensing arrangements continue to apply, and there's nothing in the agreement that derogates from that. Mr Dias, do you want to add anything to that?

Mr Dias : That's correct. We don't actually seek to impose any kind of rules on our trading partners through trade agreements in relation to this, because we ourselves don't wish to do that, as I've explained already. Going to your point, in particular, about what Australia is getting in terms of access to the Peruvian market, I'd just like to point out that there are more Australians in Peru than there are Peruvians in Australia.

Senator IAN MACDONALD: Of course, yes.

Mr Dias : A lot of them, as you point out, are in the mining sector. So Peru has made commitments on a range of different categories, as we have. We don't make occupation-specific commitments, so we limit our commitments in relation to the list of eligible occupations. Peru takes a slightly different approach: it actually lists broad occupation categories, and they include the ones that you've mentioned. They include, for example, electrical, engineering and so forth.

Senator IAN MACDONALD: Thank you.

Senator KENEALLY: I'd like to go to labour market testing. As we heard in the last session, regarding the TPP-11, that treaty proposes to remove labour market testing for contractual service providers for six countries, including Peru. However, the PAFTA does not waive labour market testing for contractual service providers. Why did the government waive labour market testing for contractual service suppliers in the TPP-11 for Peru if it's not prepared to do so in the Peru-Australia Free Trade Agreement?

Mr Jory : Thank you for the question. They were different agreements.

Senator KENEALLY: But the same two countries.

Mr Jory : As my colleague Mr Mina said before, in relation to the TPP there was a decision that was taken amongst the 11 parties not to interfere with that market access package at all. That includes the totality of the market access package, including waiving labour market testing for contractual service suppliers from Peru. That was the rationale in that particular agreement for TPP. In Peru, that was, I guess, the balance of the interests. There are areas in Peru and in PAFTA that exceed TPP, and there are areas that Peru would probably say, in this instance, might be TPP-minus. So there's a difference, I guess, across the agreement, and that reflects our bilateral interests, I guess, in that particular negotiation.

Senator KENEALLY: If I understand you correctly there, there are some areas in the Peru free trade agreement where labour market testing will apply but then some areas where, because in TPP-11 we've exempted labour market testing, it won't apply. Is that basically it—some sectors, some professions or some skills?

Mr Jory : The difference between the agreements is that in the Peru-Australia Free Trade Agreement we did not waive labour market testing for contractual services suppliers.

Senator KENEALLY: But we did in TPP-11?

Mr Jory : That's right.

Senator KENEALLY: So, if you're an Australian business, how do you know which treaty applies to you?

Mr Jory : I'll ask my colleague Mr Willard, from Home Affairs, to answer that one, as it goes to the implementation of the agreement.

Mr Willard : The issue would apply to a Peruvian person seeking to enter Australia. If both TPP-11 and PAFTA entered into force, when they make their application they could seek a labour market exemption on the basis of being a contractual service supplier.

Senator KENEALLY: Under TPP-11?

Mr Willard : Under TPP-11.

Senator KENEALLY: But, essentially, not waiving labour market testing in PAFTA is meaningless?

Mr Willard : Yes. Well, if TPP-11 were also in force, you could access it through TPP-11.

Senator KENEALLY: So if TPP-11 comes into force and PAFTA comes into force, this provision in PAFTA is meaningless—the fact that you've not waived labour market testing of contractual service suppliers is meaningless?

CHAIR: You can't ask for an opinion, Senator. Could you just rephrase that.

Senator KENEALLY: I'm not—

Mr JOSH WILSON: 'Meaningless' is not really an opinion.

Senator KENEALLY: 'Meaningless' isn't an opinion. What force will PAFTA have if TPP-11 comes into force?

CHAIR: That's a better question.

Senator KENEALLY: Thank you, Mr Robert.

Mr Jory : There are differences between the length-of-stay commitments. The current visa system for contractual service suppliers, as I understand it, allows for a length of stay for a contractual service supplier of up to four years. The commitment that we took in the Peru-Australia Free Trade Agreement for contractual service suppliers was for a stay of two years. And the commitment that, as I understand it, we took in TPP-11 was for a stay of one year. Is that correct, Mr Dias?

Mr Dias : Yes.

Senator KENEALLY: So that's another inconsistency between the two?

Mr JOSH WILSON: So you can have one year without labour market testing, or two years but you have to do the labour market testing?

Mr Jory : That's correct.

CHAIR: Are there any more questions?

Senator KENEALLY: I'm trying to understand how these concessions are consistent with each other and what effect these discrepancies will have on Australian employers and employees, so let me put this question: has the department modelled the economic impact of the inclusion of labour market testing in PAFTA and the removal of it in TPP-11? Have you done any modelling to look at the impact of that on Australian workers? Do you have anything you can share with us to tell us that you've looked at how that inconsistency will work in practice?

Mr Jory : The current visa system allows for a stay of four years and imposes labour market testing. We haven't conducted economic modelling of the kind that you refer to in relation to TPP-11 and the Peru-Australia Free Trade Agreement in relation to labour market testing. I don't know if Mr Willard wants to add anything to that.

Mr Willard : No.

Ms TEMPLEMAN: Where there are inconsistencies between the two agreements we've been discussing and potentially a third one, who gets to decide which provisions are applied?

Mr Jory : In general terms the state. So in this case Australia must meet the obligations in all of the treaties. That will generally mean that if we apply the highest standard we will, in general terms, meet a different standard. It is, as I said before, not unusual that Australia has a range of free trade agreements with the same parties. We have that with Malaysia under MAFTA and under AANZFTA. We will have it with Japan. Also, in relation to the Regional Comprehensive Economic Partnership, there are a number of parties that we have FTAs with already—for example, Japan, Korea and China. So it's not unusual that there are these different provisions in different agreements governing trade and, in general terms, the higher standard will apply. For some areas, such as goods trade, the trader can choose. So, when the trader makes a decision to use a particular rule of origin that attaches to a particular treaty in order to get a particular tariff preference, they are, in essence, electing to use that agreement and, I guess, the provisions of that agreement. For example, you asked the question that before: what if there's a difference between a rule of origin and a tariff? In Peru and in the TPP, let's say the trader chooses to the Peru-Australia FTA. In that case there would be an expectation that those rules would apply. That's in terms of the rules that we would apply to the trader. Peru would have an expectation that we would apply all of the obligations that we have entered into in both treaties and that we would not derogate from either of them.

Ms TEMPLEMAN: Okay. Thank you.

CHAIR: Thank you for your evidence and your attendance here today. If you've been asked to provide any additional information, would you please forward it to the secretary within seven working days. As stated, it's your responsibility to ensure the deadline is met, and the secretariat will assist you with that. You'll be sent a copy of the transcript of evidence when it becomes available and will have an opportunity to request corrections to any transcription errors. Thank you again. We will suspend for five minutes.

Proceedings suspended from 11:42 to 11:48