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Standing Committee on Infrastructure and Communications - 28/11/2012 - Information technology pricing

McCORMICK, Mr Hamish, First Assistant Secretary, Office of Trade Negotiations, Department of Foreign Affairs and Trade

Committee met at 16 :32

CHAIR ( Mr Champion ): I declare open this public hearing and welcome all the attendees here, including those who are listening online to our webcast. This is an inquiry into IT pricing in Australia. We have been asking: do Australians pay more for their IT software and hardware than consumers in overseas markets and, if so, why? Obviously this inquiry has generated a great deal of public interest, a great many submissions and a lot of commentary on social media. It is an issue that has been in the news and in the public mind for a long time. It affects people everyday, whether they are downloading their own music, buying a computer or their companies or organisations are operating on a much larger scale. To date we have had 95 submissions and five supplementary submissions, all of which are available on the website of the committee at and we look forward to hearing from the Department of Foreign Affairs and Trade today.

Welcome, Mr McCormick. Although the committee does not require you to give evidence under oath, I should warn you that hearings are a legal proceeding of the parliament and warrant the same respect as proceedings of the House itself. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I invite you to make a brief opening statement before we proceed to questions.

Mr McCormick : Thank you very much, Chair. Just to briefly outline at the start, the Department of Foreign Affairs and Trade works with other governments to develop and implement global trading rules that promote free trade. These rules are essentially designed to break down tariffs and remove barriers to trade, promoting access to overseas markets and providing a greater choice of products and services for Australian consumers.

The committee's inquiry is focusing on differential pricing for information technology products. Typically, differential pricing is a private commercial matter for the relevant businesses which give effect to distribution arrangements as permitted by intellectual property rights or under contract law. Differential pricing is not inconsistent with global trading rules. In the context of differential pricing—and having read some of the submissions and from some discussions we have had in another format previously—I understand that the committee is looking into how to tackle what is loosely termed geoblocking. For the sake of clarity—and I think this is an important thing because it goes to the definition of some of these items—what I understand that term to mean is the use of internet addresses, credit card numbers or other means of electronic identification to block internet sales and downloads of electronic products—for example music, games and computer programs—based on the geographic location of the consumer.

Australia has rights and obligations under free trade agreements, World Trade Organization agreements and other international treaties, and our rights and obligations include the right to prevent the abuse of intellectual property rights. Australia also has rights, including in relevant trade agreements, to implement measures addressing anti-competitive business conduct. These rights may be applicable where geoblocking is being used to implement differential pricing in an anti-competitive way, including under contract law. The department is ready to assist the committee if you identify options that you are considering as recommendations. However, a threshold issue is to identify options available to Australia to exercise jurisdiction in relation to a website hosted outside of Australia in another country. Unless you can actually deal with that issue it would seem an important requirement if you want to develop practical measures to address anti-competitive geoblocking.

CHAIR: Obviously geoblocking has been an issue of concern for the committee. In particular, it seems to be this interaction between copyright law and possibly free trade or trade agreements we have elsewhere. I appreciate that you have given us a practical issue about geoblocking but would there be anything in that interaction of copyright law and some of the trade agreements we have that would prevent domestic legislation about geoblocking.

Mr McCormick : As a general rule, we have had a look and we do not think, to the extent that what you are actually addressing is anti-competitive behaviour, and what the recommendations really are going to is anti-competitive behaviour, then certainly we have not been able to identify anything in our agreements or the WTO agreement that would prevent us from putting in place domestic measures to address anti-competitive behaviour. I keep saying anti-competitive because—you have heard this from a number of people making presentations to the committee—differential pricing is in itself neither a good thing nor a bad thing. It is a reality. We have it domestically in Australia. I have read somewhere that if you live in Canberra and you go and buy something at Coles you are buying the most expensive products in Australia. There are a lot of commercial reasons as to why differential pricing happens. I am working on the assumption that you are focusing not on the existence of differential pricing per se but on differential pricing that represents some sort of anti-competitive behaviour. That is the proviso. If the focus is on anti-competitive behaviour and the abuse of intellectual property rights in some instances then certainly we are not prevented from addressing abuse of intellectual property rights through our trade agreements, our free trade agreement, WTO agreements or whatever.

That is the basic principle. It can be more complicated because, of course, intellectual property covers a whole lot of things—copyright and a whole lot of other areas as well. It is impossible to give you a clear-cut, 100 per cent answer that covers every possible option that people might be able to identify to address it. But as a general rule, certainly we are not prevented in any way from addressing abuses of intellectual property rights.

CHAIR: I seem to remember that the ACCC gave us some evidence that there is an exemption of some type for intellectual property. I think that was in their evidence last time. Do you remember?

Mr HUSIC: No, I do not.

CHAIR: I will not question you on it but I do vaguely remember there was something under our existing competition law. There was a clause that they referred to that they have constantly been trying to get removed from our own Trade Practices Act. It revolved around this issue of intellectual property and anticompetitive behaviour.

Mr McCormick : Certainly, the WTO, for example, with the TRIPS agreement—the Agreement on Trade-Related Aspects of Intellectual Property Rights under the WTO—recognises that there might be abuse of intellectual property and recognises the rights of people to take measures domestically to try to address those.

CHAIR: Excellent. It was section 51, part 3, apparently, of the Trade Practices Act. We will get the secretariat to send you that relevant section, but perhaps on notice you could give us advice if there is anything—

Mr NEVILLE: And to what extent it exempts people from improper practice.

CHAIR: There does seem to be this interaction between these three things. There is copyright law, the issue about our trading agreements and then, if you like, technological innovation which is preventing consumers from accessing products. There is nothing wrong with price differentials; they can have a price differential. It is the mechanisms blocking people from being able to access different parts of the market.

You used the Coles example but, of course, if you do not like Coles you can go down to Costco at the airport—which would seem to me to be the issue. But the deputy chair might have some questions as well.

Mr NEVILLE: You were saying that differential pricing is not inconsistent with world trade practice. I think we understand that to a point; we understand that there are factors that might affect the price of a unit that is manufactured in China or the United States or somewhere and that needs to be perhaps freighted in small quantities rather than large quantities, and therefore there is an additional per unit packing cost that is dearer. We understand if there are tariffs and we understand if there are retail taxes involved in the selling of the product; we understand all those. We understand volume sales, as distinct from boutique-type operations: if it is a piece of electronic gadgetry equipment or componentry that might be in one of these specialty shops where the proprietor is getting these out from China or the United States one or two units at a time—you are going to pay a premium for something like that. I think we all understand that.

I think what the inquiry is about, however, is the principle that intellectual property—IT, film, entertainment, games and all this stuff; electronic and scientific componentry as well—are sold in some countries at quite a reasonable price and sold in other countries for amounts varying from 15 or 20 per cent up to 50 per cent. Some of the examples we have seen are 150 per cent. We do not seem to have a mechanism whereby we can pursue that sort of thing.

You can say, I suppose, that people in this day of electronic purchasing—electronic shopping—can probably get around a lot of that. On the other hand, it is both commercially and culturally insulting to say to Australians, 'You have to buy an item here for $1.50 that sells in the States for 50 cents or sells in China for 40 cents,'—whatever it might be—'because someone has loaded up the price'.

It is not because it is a real reflection of what that product is worth in Australia, but rather because someone has used a mechanism to load up that price. What becomes even more offensive in these days of electronic shopping, is that you so encrypt some of these devices that unless they are bought in Australia at the higher price they will not work in the various play systems or as an adjunct to other equipment. Then we get on to blocking, which is another form of that.

What I think we are trying to find out from you is: what has the department seen over the years in the way that Australia is treated? Are we knocked off a lot in these sorts of things? You must get people who come in and want to sell componentry to the States, China, Korea and Japan, and equally the same people want to import things. Do you find, as a general rule, we are getting knocked off just because we are a small market down at the bottom of the world, and there is not much we can do about it?

Mr McCormick : That is a difficult thing to give you a considered answer to. My immediate reaction is that I do not see that myself—as a consumer, I might just note. I do see variations in pricing of IT products. I have seen that over time as a consumer. I have also had that issue about—

Mr NEVILLE: Do you mean country to country?

Mr McCormick : Yes, country to country, or even within a country too. The truth is, with regards to IT products, most of the time I am probably better off going to Sydney and getting something from Sydney. In my own experience, even if I were to buy products within Australia, there are websites outside a shop in the ACT that will offer differential pricing and I do have a choice there. I have seen some of those differentials come down over time. My casual observation is that some of the differentials have come down quite a lot for some products that I am actually interested in as a consumer. As a general rule, I have not seen any evidence of trade agreements where we are getting knocked off.

One of the questions I have—again, this may not be completely related to your question—is that sometimes there are licensing agreements that people have to sell things. When you are talking about who is making money, there are consumer interests, there are producer interests and there are middle-people interests. The people who hold the rights may very well be Australians. To the extent that there is differential pricing, it is never clear to me exactly if a differential is accounted for by an Australian company who may have actually signed a contract to distribute a product and want to have sole licensing rights, or is it going back to the producer of the product or the manufacturer.

I do not have a clear view of how you distribute that myself, but I certainly do not see any patterns. I must admit that internet purchasing is a reasonably new thing. It was still not that long ago that there was not the internet. I still remember when you could not really buy products over the internet. You can certainly do a lot more now than you could then. The price differentials that I see seem to be coming down, although it is quite clear that there are some products where they are not. The difference can vary too because of exchange rates and what have you. So even if you can buy a product overseas, what the price impact will be can vary quite significantly depending on the fluctuations in exchange rates as well. I do not see any systematic treatment of Australia, or Australian products. You see the same thing, people are often complaining—

Mr HUSIC: So you do not see systematic treatment? What does that mean?

Mr McCormick : Systematic treatment of products to our disadvantage, in terms of pricing and things.

Mr HUSIC: You do not see it?

Mr McCormick : I have not seen a pattern that would suggest that. If you have evidence—

Mr HUSIC: We do. We have submissions by Choice where they did 200 price checks and saw that, on average, it was 50 per cent higher.

Mr McCormick : That was not the question, I think.

Mr HUSIC: You asked me if there was evidence and I am saying that there was.

Mr NEVILLE: Choice have given us some examples and, as Mr Husic said, it is 52 per cent on average higher than you would pay in the source countries. When we get most offended—and I will finish on this point—is when we are getting down to electronic or electronic based equipment for disabled people and we find that Australia is being knocked off, then I think it goes beyond just the market at play. It means people are being disadvantaged unfairly. We have had a bit of an example of that in the evidence as well.

Mr SYMON: Mr McCormick, I would like to follow on from there and then get onto another subject. You have spoken about differential pricing and access and, to me, the key is access. We can use the Canberra/Sydney example—or others—but wherever you are, if you can access a differential price, you will pay the difference in freight whatever it may be—but you can still access that price. Whereas when it comes to what we have just spoken about, you cannot access the price of the digital product because you are blocked out. To me, that is the problem. I can go to any website in the world that I like, as we all can, to purchase a product, except I cannot actually purchase some of those products because I live in the wrong country.

My question, therefore, goes to what can be done at the level of agreement between countries in the area of treaties. Is there something to be done there that takes what I see as a disadvantage to Australia and other small markets out of that? Is that the direction we can go in?

Mr McCormick : We have thought about this issue generally and, again, it comes back to that whole issue about whether it is something that governments do. In trade agreements, the focus is either on government measures that restrict trade, on government measures, policies or regulations that make exports more expensive through taxes or imports more expensive, or on other forms of policies or regulations that have an impact on imports and exports. It would seem that a lot of these activities seem to be by companies, rather than something that is actually created or perpetuated by governments. So that makes it an interesting one. But I guess, to some extent, that comes back to competition and the way in which we approach competition, because that is what our competition policy framework is all about—trying to make sure that there is adequate competition in the market so that the consumers are not being unfairly treated and, if there is unfair competition, that there are mechanisms to treat that. To the extent that what we are talking about here is unfair competition, one of the issues I would have thought that you would be looking at is how to use competition law to get to some of these issues. We do it in other areas as well, but in other ways it again comes to government-to-government agreements really being about government actions rather than about the actions of private companies.

Mr SYMON: Is there, under a free trade agreement for instance, an opportunity to open that window in the agreement, or are you saying that it can really only be done through our Competition and Consumer Commission law?

Mr McCormick : Since my other appearance before the committee we have been thinking about this issue. For example, we have the Trans-Pacific Partnership negotiations going on and we have been thinking, 'Is there something here that we could do to facilitate resolutions to some of these issues?' We have raised it in there to say that we would like to have a discussion about this, but it is not clear what exactly might be possible. Then, of course, you would have to get—

Mr HUSIC: Sorry, can I clear that? You say you raised it? You flagged to the US that this is an issue, the discussion in the Trans-Pacific Partnership?

Mr McCormick : Yes.

Mr HUSIC: Okay. Thank you.

Mr NEVILLE: In other words you have said to them, I suppose, that one of the fields where it is unfair is where there is a product that would be used in conjunction with another product in the States, encrypted so that it cannot be used with the Australian product unless it is purchased in Australia. Can you write into a trade agreement that that is just not on, that any product sold in the host country and being sold in Australia and which is used in conjunction with another piece of equipment must be interoperable?

Mr McCormick : I would have to give that some more thought. My initial response would be that I do not think that would be possible. This is also something that you have to get the agreement of other governments to do.

Mr NEVILLE: I will give you an analogy. We had this argument over the years about medicines and new drugs coming on the market. The manufacturers of drugs, quite rightly, say that they have a right to an intellectual property holiday that compensates them for the years of research that go into developing the life-saving drug or a drug that makes life a lot easier for people. I think that, broadly, most people accept that proposition to a point.

But what we do not accept in Australia are drugs that are being sold overseas quite inexpensively and for which we in Australia are paying a premium. The Commonwealth government has intervened to say that there shall be certain time limits on these things, after which it will grant licenses for generic forms of those drugs to be manufactured. Could we have an analogous type of operation with electronic equipment?

Mr McCormick : I would have to reflect on that. I could not give you an immediate answer.

Mr NEVILLE: Would you like to? We do not seem to be able to get a starting point on this thing; there are analogies around in other walks of life, but we seem to come to this IT field and everyone is a bit scared to lay down rules.

Mr McCormick : I think there are a lot of issues that, when I think about these things, are actually not so dissimilar for products that are not about intellectual property but just normal products. We know that there are big debates about whether you pay too much for milk or too little for milk and all those sorts of issues. When you sell overseas you often hear people saying, 'I am paying too much for importing some basic commodity'. So there are discussions about this.

It comes back to that issue with intellectual property: just in the same way as if you own a car and you want to export it overseas that you do not want someone to come along and steal your car. I guess that intellectual property is essentially about providing an analogous sort of protection for something that is not a physical product. A car or something else is—

Mr NEVILLE: Yes, but if you go into your chemist and you have been paying $18 per prescription for a particular drug and the chemist says to you, 'This has come off the intellectual list'—whatever they call it, the protected list—'and it's now being manufactured by one of the Australian companies, Alphapharm, and you can buy it for $11 or $12,' what generally happens is that a lot of people then go over to that drug and the drug company who originally had the initial product starts to drop their price.

Can we find some mechanism that makes it less attractive for them to try to knock off the Australian market? Some form of government intervention?

Mr McCormick : I think that would be very difficult to do because you would actually have to get the agreement of a whole range of countries to do that; countries that may have different perspectives on this. People who would be very concerned about intervening in markets in one way, just as they would be concerned about interfering in markets in the other way.

If you had a specific thing we could have a look at it, but I think that a lot of these issues are actually about our domestic policy. There are many issues to do with our domestic things. A lot of these issues are not actually the responsibility of our department—I am not trying to get out of this, but the experts on copyright are in the Attorney-General's Department.

Mr NEVILLE: We have to start; if we cannot start with you, where do we start?

CHAIR: Just on trade agreements, I guess one of the frustrations for consumers is that they want in effect a global marketplace for downloads, that sort of thing. They want to be able to go to an American website and download there and get the cost saving. I would be interested in the steps that we might take in trade agreements to make that a reality. Using the example of milk, we used to have state-based regimes for milk, which was a benefit for small producers in states like my own against bigger Victorian producers. Now we have deregulated the dairy industry and the big producers are free to sell their product around the country. For IT, I think the committee's view, particularly in terms of downloads, is that there should be a global market for downloads. We are not against copyright holders and intellectual property holders getting a return; that is not the problem. It is that they seek a bigger return from Australians than they do from other parts of the world and they make that enforceable through technological instruments. I would be interested in how we might pursue trade agreements which say to companies that we want a global marketplace, in effect, or at least an even marketplace for our domestic market with the US or the UK.

Mr McCormick : This is a difficult area because I cannot give you a clear answer—

CHAIR: On notice.

Mr McCormick : Even on notice I do not think I could give you a very clear answer on that one because, as I said, these measures are about company behaviour and what we have is different competition policy regimes nationally around the world. There are efforts to actually cooperate about competition policy between countries going on.

CHAIR: That is what I am interested in. In the same way as we do deals on tariffs—we drop our tariff here, you drop your tariff there in trade agreements—why wouldn't we be doing the same thing about alignment of competition law?

Mr McCormick : Again, competition policy is an issue that is not our responsibility; it is the responsibility in policy terms of Treasury and the ACCC. I think the ACCC has been appearing before you—

CHAIR: I guess what I am getting at is that if Australia is doing a trade agreement with country X and we both say, 'We don't want this practice to go on, so we are both going to change our domestic competition laws in this way to make sure it cannot happen.' You could in theory do that, couldn't you?

Mr McCormick : In theory you could align the way you handle anti-competitive practices so that it has that sort of impact. The issue is whether or not competition policy is at a stage where countries are prepared to do that. I do not know if you remember that there was a push a number of years ago at the start of the Doha round at the beginning of the 2000s where a number of people said we should be looking at having international rules on trade and competition policy. There was a big push-back from a range of countries and there was no consensus to do that. So there is a history about trying to make progress internationally on competition policy. I think the pattern has been that there has been a lot more contact between competition authorities and there are forums where they meet and discuss possible ways to do that. We have broad frameworks in trade agreements but they do not get into a lot of specifics on competition policy—

CHAIR: You could do a bilateral deal presumably.

Mr McCormick : Again, you would be better off talking to experts on competition policy about what you might be able to do on that one. I could not give you a definitive answer on that.

CHAIR: But it is possible that countries could come to arrangements. It is not an impossibility presumably.

Mr McCormick : As I said, people have been interested in competition policy and how to address those issues. Anti-competitive behaviour is seen as a bad thing, so the question is how to address that and how to do it on a more global basis. Certainly I think that is an area people could look at, although it may be a longer-term issue.

CHAIR: I will let Mr Husic have a crack.

Mr HUSIC: I think a lot of businesses and consumers will be very pleased to hear that Australia has raised this in the context of the TPP, to at least get it considered, so I would like to congratulate DFAT on doing that. You say it has been raised: has this issue just been slated as a matter for discussion, or have concrete talks progressed?

Mr McCormick : No, not concrete talks. Because we have been monitoring the interest here and we know that there is an issue, we have said, 'This is an issue of some domestic interest in Australia. We'd like to have a better discussion about this. Is there something that we could do in the TPP?' because we are trying to produce benefits across the board for businesses and consumers, and this is an issue that is of concern. So we would like to have some discussion about the possibilities: is there something that we could do to facilitate better outcomes for consumers? That is the background. We have flagged that we want to have it but we have not—

Mr HUSIC: Just so I understand, because a number of us have never been involved in trade negotiations before, can you advise us how you flag this so that you signal to other countries that this is of interest to Australia?

Mr McCormick : Well, you basically say, 'We've been thinking about another issue—'

Mr HUSIC: Sorry; I am just thinking more of the physical mechanism. Do you do that in face-to-face talks or do all the countries have to list formally what they want to discuss in the various rounds of trade talks?

Mr McCormick : People can put forward proposals at any time of issues that they want to consider as part of a negotiation.

Mr HUSIC: As part of this process, we have listed this as an issue as part of an overall submission?

Mr McCormick : In the negotiations, there are about 25 different negotiating groups that deal with a different range of issues. In the groups that deal with information technology issues, we have raised this as an issue that we would like to have further discussions about.

Mr HUSIC: What is the formal title of the information technology working group?

Mr McCormick : We have an electronic commerce working group. We have raised that as an issue that we would like to discuss with them.

Mr HUSIC: Are you at liberty to say what the reaction has been to that?

Mr McCormick : People have said, 'Yes, we're prepared to have a discussion about that,' but we have not got beyond that, really. It is quite a recent development and we have been trying to think about how to do that and what scope there is in an agreement to do things that facilitate pro-competitive outcomes. It is something, as I said, that we have flagged that we would like to have a discussion about, and I think people are willing to have that discussion.

Mr HUSIC: In that context, do you envisage that the negotiators from our country would look into issues such as intellectual property rights and the use of geoblocking, which the chair referred to earlier and you also touched upon and which has been referred to in other places as 'effective technological measures'. I think we may have previously canvassed this in other discussions that we have had. The measures, these ETMs, have been used by international copyright holders, particularly from the US. I am led to believe, from previous submissions, that the use of these effective technological measures has been affirmed in Australia's free trade agreement with the US. I am led to believe that is backed up by research paper No. 14 2003-04 Intellectual property rights and the Australia-US Free Trade Agreement that has been prepared by the Parliamentary Library here. Is the use of these ETMs and geoblocking something that is under active discussion, to consider whether or not this technology is being used in a way that is detrimental to Australian consumers and businesses?

Mr McCormick : No. We have raised the issue rather than those specifics about whether it should be to do with ETMs or not. Obviously, you are right. We have some international obligations concerning ETMs, also known as TPMs. We have obligations not only in AUSFTA but in multilateral treaties—the WIPO copyright treaty and the WIPO Performances and Phonograms Treaty as well. So we have particular obligations about ETMs. Whether geoblocking is covered by those international obligations would depend on whether the geoblocking constitutes a TPM and whether it has been undertaken to control access to protected subject matter. That is a legal question but I do not think you can then jump to the assumption that geoblocking in and of itself is about ETMs. Some of these questions are really quite complicated legal questions, again, that the Attorney-General's Department copyright experts would be better placed to give you more views on that.

Mr HUSIC: Drawing from DFAT's experience—and if you need to take this on notice I completely understand because I know this is an almost esoteric subject in itself—what is the intention with these ETMs? How are they supposed to work? What are they supposed to achieve? What are their objectives?

Mr McCormick : Again, it is part and parcel of their system of international property protection. We have international obligations to prohibit the breaking of TPMs that control access to protected subject matter and to prohibit the availability of technology to devices that can be used to break TPMs. I guess it is about that balance of intellectual property between rights holders and consumers. As I said, there is a sense that intellectual property systems want to avoid the parallel issue of theft of real property and theft of intellectual property. There are mechanisms there to try to do that.

Mr HUSIC: If I can give you just two examples: firstly, a situation where a provider offers products to the Australian market and the US market. The products are absolutely identical but the minute a person goes to purchase the cheaper product that might not be in their home country, they are directed to a website where, as a result, they have to buy at the more expensive rate. Example two: we have been notified that when people, before they even go to purchase, are identified by their IP address and are directed instantly to the website in their area, so that they cannot then determine what the price differences are by using that provider's website. Do you see ETMs working in that way to allow that to occur, based on what you said a few moments ago when you cited, for example, cases of theft as being a thing that ETMs try to sidestep?

Mr McCormick : I cannot give you an answer on that. It goes back to this question: are those instances, which I think people have referred to as geoblocking, actually ETMs or TPMs or are they something else? That is a question that we in DFAT are not really in a position to be able to provide you an answer.

Mr HUSIC: Okay.

Mr McCormick : I am not trying to avoid your question.

Mr HUSIC: I am not trying to be difficult and I certainly understand that. But I am trying to understand why we would need to go to Attorney-General's to work that out. Are the ETMs defined under the trade agreement or are they defined under another form of law?

Mr McCormick : Our obligations in Australia are about our domestic intellectual property system and the responsibility for that is largely with the Attorney-General's Department. We have international obligations but that does not mean that we do not have a domestic system that is consistent with our international obligations. It does not mean that everybody's system is the same and there are flexibilities and exceptions and limitations. People design systems in different ways, even though there are still international obligations at play. The issue here is about our intellectual property system in Australia. If it is about a copyright issue then it is about our copyright protection regime and the expertise on that would lie with the Attorney-General's Department.

Mr HUSIC: You indicated earlier that this is a legal matter that would have to be pursued. Would that be through the WTO, or in domestic legal systems?

Mr McCormick : If there was something domestically that people were proposing that was inconsistent with our international obligations, that is an issue that we would take some interest in. There is nothing to stop a whole range of domestic policy developments over time. It is really the responsibility of the Australian parliament to pass legislation. Those are issues about our system rather than the international system. The Australian system is the primary one; it is our laws in Australia that actually define what the rights and obligations are.

Mr HUSIC: If we believed that the definition of ETMs and their operation as they exist under current trade agreements were being misused, would we pursue that through the World Trade Organization or would there be dispute resolution mechanisms within the free trade agreements to pursue that?

Mr McCormick : Sorry—this is almost like a circular answer, but the question would be: is somebody else breaching an international obligation that we are both a party to? We would have a look at that, and if we thought that they were breaching it then there are a whole lot of mechanisms to try and resolve that. So the question would be: is another government breaching their international obligations? If so, the mechanism depends on the agreement we are talking about to come to a mutually acceptable resolution of a concern. You start off having discussions with people and then, depending on the agreement, there are different steps and different resolution mechanisms available.

Mr HUSIC: Roughly when did Australia flag its interest in having a discussion about price differentials within the framework of the TPP?

Mr McCormick : It was a couple of months ago.

Mr HUSIC: And the discussions are ongoing?

Mr McCormick : Yes, the discussions are ongoing

Mr HUSIC: When do you anticipate that they will come to a head, if I could use that colloquial reference?

Mr McCormick : The next round of negotiations are in Auckland.

Mr HUSIC: When is that?

Mr McCormick : That is next week—from 3 to 12 December. We raised that as an issue. We said we wanted to discuss that some more, so we will be discussing it there. That is one of the issues we will be discussing again—trying to identify whether or not there is a set of issues here, whether we can do something in the TPP and if there is a willingness to do something. We are having the same problem as you are about what the solution is to some of these issues. As I said before, if there are commercial practices that are not anti-competitive but which result in price differentials then there is obviously a reluctance for people to be involved. But, to the extent that people have been identifying what they see as problems, we are very cognisant of the fact that we want to have a discussion to see whether there is a common view that we should be looking at this to see what is possible under a trade agreement. On the other hand, it may be that trade agreements are not an effective means of trying to address this. Maybe it is outside the scope of what you can do in a trade agreement.

Mr HUSIC: Okay. I think it is good that all of that has been raised.

CHAIR: And I think there is generally a view of congratulations from the committee to the department. We think it is good that you are raising these issues.

Thank you for your attendance at the hearing today. It was very informative. The secretariat will send you a draft transcript of proceedings and you can request correction of any errors of transcription. Obviously, it would be helpful if you could send the secretariat any additional material that you have undertaken to provide. We may also send you some questions in writing from time to time, if that is okay.

Resolved (on motion by Mr Symon):

That this committee authorises publication of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 17:20