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Thursday, 24 June 2004
Page: 31472

Mr GAVAN O'CONNOR (10:40 AM) —Before I commence my speech in this debate and with your indulgence, Mr Deputy Speaker, as you are aware, a former Labor minister for agriculture, Bob Collins, suffered severe injuries in a car accident over the weekend. Bob underwent surgery in Adelaide yesterday. I understand that he has come through the operation well and his condition is stable. As a Labor minister for agriculture he has a deep interest in trade matters. On behalf of all members I wish him a speedy recovery.

The two bills that we are debating here today are related to the so-called free trade agreement with the United States. The US Free Trade Agreement Implementation Bill 2004 amends a number of pieces of legislation, including two pieces of legislation that fall within the area of my portfolio responsibilities—namely, the Agricultural and Veterinary Chemicals Act 1994 and the Australian Wine and Brandy Corporation Act 1980. The US Free Trade Agreement Implementation (Customs Tariff) Bill 2004 provides duty-free access for certain goods and preferential rates of customs duty for other goods originating in the United States.

Labor will not be opposing these bills in the House at this stage, but we will make a final decision once we have received the report of the Senate Select Committee on the Free Trade Agreement between Australia and the United States of America chaired by my colleague Senator Peter Cook, which is currently inquiring into the so-called free trade agreement. Labor will be carefully examining the report of that committee before determining our final position on these bills when they are debated in the Senate and when they come back into the House.

The government is fond of touting this trade agreement as a free trade agreement. It is clear that it is not. The agreement is not comprehensive because a major rural industry—the sugar industry, with production valued at $1.3 billion and exports of around $1 billion—has been left off the table completely by the Howard government as a result of political pressure by the US sugar lobby and the American President. Also, this agreement has left in place and, in some cases, enhanced the protective measures employed by the United States to inhibit freer access by Australian agricultural producers to some key markets. Quotas, in-quota tariffs, safeguard provisions and long phase-in periods are still the order of the day in this agreement.

It is quite clear that this agreement was negotiated and concluded according to the Prime Minister's political timetable. Now a domestic imperative is the reason that these bills have been introduced into the House at this time for debate. The Prime Minister ought not to be playing politics and political games with Australia's national interest. Labor will not be stampeded into making an untimely decision on the fate of this trade agreement merely to suit the electoral timetable of the Prime Minister. We owe it to our electorates and to the Australian people to thoroughly examine this agreement and its impact on Australian industries, Australian workers, the farm sector and, of course, the Australian community generally.

At present, we simply do not have enough information to make an informed decision about the purported benefits of the agreement. In my own electorate of Corio there has been considerable disquiet about the possible impacts of the so-called free trade agreement on the pharmaceutical benefits scheme—the PBS. For many of my constituents, an increase in the cost of medicines would put a real strain on the family budget and have a real detrimental impact on their standard of living.

Before we finalise our position on the FTA, we have to be absolutely sure that we will not be placing an increased burden, by increasing the costs of medicines, on those Australians who can least afford it. Evidence given to the Senate inquiry on the FTA by medical experts, academics and even former members of the Pharmaceutical Benefits Advisory Committee has suggested that the processes established under this trade agreement, which allow decisions of Australia's Pharmaceutical Benefits Advisory Committee to be reviewed, could lead to significant increases in costs.

In a submission to the inquiry by Professor Peter Drahos and others entitled The FTA and the PBS they argued that the agreement would increase the bargaining power of the United States drug companies. The submission said that over time the price differential for medicines between the Australian and United States markets would be significantly reduced. They cited a previous study by the Productivity Commission which found that prescription drugs in the United States are around three times the price of equivalent drugs in Australia. Professor Drahos and his colleagues found that, even if the cost differential between Australia and the United States were halved over the next five to 10 years, the cost of the PBS would increase by $1.6 billion and there would be considerable flow-on cost increases for Australian hospitals.

My constituents in Corio greatly value the PBS and, if the FTA is shown to be likely to have a negative impact on the PBS, they would rightly be very concerned. This type of uncertainty must be addressed before any decision can be made by Labor as to the future of these bills. My electorate of Corio is based on one of Australia's great manufacturing centres. At the heart of our regional economy are the automotive and TCF industries. Manufacturing provides more jobs in Geelong than any other sector. According to the 2001 census, there are 9,355 people living in my electorate and another 6,348 living in the electorate of the member for Corangamite, just across the Barwon River but in the Geelong region, who have jobs in manufacturing industries.

I have had discussions with representatives of a number of manufacturing industries in Geelong about the likely impact of this trade agreement on their businesses, including Ford Australia. I have also discussed the agreement with the Geelong and Region Trades and Labour Council and with representatives of the Australian Manufacturing Workers Union, the AMWU. The AMWU is rightly concerned about the impact that the FTA might have on the jobs of its members. Just yesterday, I met with a delegation from the AMWU, which included Geelong shop stewards, that raised a number of significant issues with me concerning the impacts of the FTA. The AMWU is concerned about the potential for this agreement to lead to job losses in the auto, auto parts, electrical equipment and appliances, fabricated metal products, medical and scientific equipment, non-electrical machinery and paper and wood product industries. Many of these industries provide substantial employment in my electorate. The union has looked closely at the experience of Canadian workers following the signing of the NAFTA agreement. They are particularly concerned that, following that agreement, Canada suffered a net loss of 270,000 jobs.

To try and quantify the impact of the FTA on our manufacturing industries, the AMWU commissioned the National Institute of Economic and Industry Research to undertake an economic analysis. That analysis found that there was a reasonable probability that the Americans will start to export high value added automotive components into Australia, including instruments, brake and clutch systems, transmission systems and engines and components. The Office of the United States Trade Representative has estimated that the removal of barriers to trade on passenger motor vehicles and other components will result in an increase in the United States' exports to Australia of $720 million—not an insignificant amount in Australia's marketplace. An increase of anywhere near this magnitude would have an impact on jobs in Australia's motor vehicle manufacturing industries.

I now want to raise a number of general concerns in relation to chapter 3 of the so-called free trade agreement, which deals with agriculture. Before I turn to the details of the agreement, at the outset I point out that the most favoured nation provisions, which were negotiated in this agreement for the trade in services and investment, will not apply to agriculture. Under the MFN provisions, if the United States negotiates a better deal with some other nations for access in services and investments, then these would automatically flow on to Australia. But the Howard government did not negotiate similar provisions for Australian agriculture. Once again, our farmers were treated as second-class citizens by the Prime Minister in this trade agreement when compared to the deal done for the paper shufflers in the investment and service industries.

I will now turn my attention to the future of Australia's single desk marketing arrangements. The future of these arrangements for wheat, sugar, rice and barley under this FTA has been the subject of considerable debate. Article 3.1 commits the parties to work together in the WTO to reach an agreement to develop `disciplines that eliminate restrictions on an entity's right to export'. While the DFAT fact sheet on the FTA says that Australia's single desk arrangements for marketing Australian commodities to the world such as for sugar, rice, wheat and barley have been preserved, the US trade representative fact sheet says:

In response to US concerns about Australia's state trading enterprises, Australia committed to working with the US in the ongoing WTO negotiations on agriculture to develop export competition disciplines that eliminate restrictions on the right of entities to export.

That simply means that the government has moved its assault on Australia's single desk arrangements away from the FTA negotiations into the WTO and has agreed to work with the Americans to develop export competition disciplines that eliminate restrictions on the right of entities to export—that is a crack at the single desks.

In a media release dated 10 March 2004, American Farm Bureau President Bob Stallman is quoted as saying:

Australia had always been resistant to changes in its system of state trading enterprises (STE) but through this initiative Australia has agreed to work in principle with the United States in the WTO to make its system of agricultural trade more market oriented.

I suggest that this is something the Americans should take up themselves, because this agreement leaves in place some significant protective devices that severely restrict access by Australian agricultural producers to the US market. The report of the US Agricultural Technical Advisory Committee for Grains, Feed and Oilseed said:

We expect the Administration to hold the Australian Government to this commitment ...

The government may be technically right when it says that our single desk marketing arrangements remain intact under this FTA deal, but it seems to have given a clear commitment, which the US interests intend to pursue vigorously, to work with the US in the WTO to have such arrangements dismantled.

Further concern in this area comes from the joint letter from the US Department of Justice and the US Federal Trade Commission that has been appended to the end of chapter 7, the chapter relating to sanitary and phytosanitary measures. This letter seems to go well beyond quarantine issues. In the view of the US Department of Justice and the US Federal Trade Commission it `affirms their interest in pursuing discussions with Australia with a view to strengthening cooperation and enforcement assistance concerning antitrust and competition matters'. This letter would seem to reflect a determination to pursue agriculture related competition matters through the FTA process. It would be of concern if Australia's single desk marketing arrangements were among the competition matters to be looked at, given the commitment in chapter 3 to pursue these matters only through the WTO.

I now want to turn to concerns in relation to chapter 7 on sanitary and phytosanitary measures. The government has agreed to the establishment of a special committee on sanitary and phytosanitary matters as part of this free trade agreement with the United States. According to the text of the agreement, this committee will enhance each party's implementation of this agreement and facilitate trade between the parties. Note the reference to trade facilitation. The blurring of the lines between trade facilitation and strictly science based quarantine arrangements occurs again and again in the text of the FTA document. The Department of Foreign Affairs and Trade fact sheet on the FTA says:

Australia's quarantine and food safety regimes, which ensure our health and our environment are protected, are not affected by the Agreement.

This claim has been repeated a number of times by Australian government ministers. But this is not the view of the American Farm Bureau, which, in its paper `Implications of an Australian Free Trade Agreement on US Agriculture', states:

The sanitary/phytosanitary language calls for two initiatives, which are (1) efforts to resolve outstanding issues and (2) efforts to work together to develop and implement common ... sanitary/phytosanitary regulations.

The 8 February 2004 press release of the US Trade Representative included the statement:

Food inspection procedures that have posed barriers in the past will be addressed, benefiting sectors such as pork, citrus, apples and stone fruit.

Clearly there is a belief in the United States that the commitments given in relation to sanitary and phytosanitary measures represent an important breakthrough in getting US agricultural products through Australia's quarantine barriers. The agreement also provides for a special technical working group to be established on animal and plant health measures, once again inserting another layer into the import risk assessment process with a view to `facilitating trade to the greatest extent'. As I said earlier, the FTA has been exercising the minds of many in the parliament this week as the government brings forward the necessary legislative amendments to facilitate it.

I now want to move from the quarantine issue to specific agricultural commodities—firstly, the dairy industry. Access for a range of Australian dairy products into the United States market will be improved under this agreement, with a tripling in the current quota access in year 1 and growth in access of between three per cent and six per cent a year. It has been estimated that the increased access would be worth between $50 million and $60 million in year 1. Dairy farmers are disappointed that free trade in dairy products was not achieved, but they believe that worthwhile gains in a small but high value market have been made. However, these gains should be put in context: a gain of $50 million a year only represents a 1.6 per cent increase in Australia's $3 billion a year dairy export market.

The government has also claimed significant gains for beef producers. It is true that this agreement delivers an additional quota of 70,000 tonnes above the existing quota, but it is to be phased in over 18 years and quantity based safeguards will remain in place from years 9 to 18 and price based safeguards will remain in place indefinitely. Overnight, there has been disturbing news that a powerful United States Senate committee has voted to recommend an amendment to the US legislation that would make life even tougher for Australian beef producers. The United States Senate finance committee yesterday voted 11 to 10 to make it harder for US trade officials to waive the special beef safeguard that takes effect from year 9 of this agreement.

If this amendment is finally adopted by the US administration it will make inroads into the already meagre gains for Australian beef producers through the FTA. Beef producers and their representatives are already disappointed by both the magnitude of the quota increase and the phase-in periods. They believe that Chile got a much better deal than the one done by the Howard government. There is even some concern about the ability of the Australian industry to take advantage of the increased quotas given that the current quota ceiling has only been reached in two of the past seven years.

It is fitting that I conclude my remarks by discussing the sugar industry. The accumulated benefits to the industry, assuming implementation in 2004, would have been in the order of $2 billion if free trade had been reached. Right up to very late in the day the government led sugar producers to believe that failure to include sugar in the agreement would be a deal breaker as far as the Australian government was concerned. The trade minister was quoted in the Canberra Times of 24 January 2004, saying, `Sugar must be part of the deal.' The Deputy Prime Minister was quoted in the Age on the same day, saying:

I cannot see how Australia can agree to a free trade agreement that did not include a fair and reasonable approach to sugar ...

The Prime Minister gave his solemn commitment. He said:

I want to assure the agricultural sector of Australia that we won't be trading away their interests ...

That promise now has a very hollow ring in the cane fields of New South Wales, Queensland and Western Australia. Once again, the Prime Minister has broken a solemn promise to the sugar industry. This government has been promising the Australian sugar industry better access to markets since 1996. In facing the greatest opportunity we have had for years to crack the market access nut and send a powerful international message about how serious we really are on the issue, the trade minister and the Prime Minister squib the issue. This was one of the most spineless negotiations we have seen.