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Wednesday, 11 August 2004
Page: 26088


Senator RIDGEWAY (9:33 AM) —I wish to continue the remarks I was making last night on this amendment moved by the Greens. I indicated then that the Australian Democrats would be supporting the amendment. It needs to be said again that the amendment is really seeking to ensure that there is never, ever an investor-state dispute resolution mechanism under the agreement. A number of issues were raised last night and questions put to the minister. I hope that the minister and certainly DFAT officials have had an opportunity to reflect upon those issues, in particular article 11.16(1) which, in my view, at least provides a foot in the door to trigger a process. That process is in many respects about recognising that there may well be a change in circumstances that affects the settlement of disputes and, in those cases, an investor can request consultations with the other government to make a complaint. The government is then obliged to promptly enter into consultations with a view to allowing such a claim and establishing such procedures.

I mentioned last evening that there is also little explanation offered by DFAT in its guide to the Australia-US free trade agreement and it gives very little information, if any, as to the nature of the change in circumstances that is required to trigger the operation of that clause in the free trade agreement. Questions have been raised about the ambiguity around the degree of change that is required before the process is triggered— whether such a change must affect governance structures or simply one investor and whether it is necessary to show that such change has resulted in harm to an investor.

The amendment being put forward is one that the government ought to consider if they want to give assurances to the Australian people. While on the one hand they may talk about the free trade agreement with the United States not including an investor-state dispute resolution mechanism, the reality is that the agreement provides an opportunity for a foot in the door. The government must at the very least explain what the process is, how it can be triggered and under what circumstances, and give some explanation of the changes in circumstances that could affect the settlement of disputes. This does raise issues about how the North American Free Trade Agreement has been played out in North America, particularly between the United States, Canada and Mexico. Some of these issues have already been put on the record but I do want to repeat some of them because the government need to give an ironclad assurance that we will not end up in a situation at some time in the future where powerful corporations from the United States have an opportunity through this agreement, if circumstances should change, to directly sue the Australian government or other governments as a result of what it is we are agreeing to in the free trade agreement itself.

I think that in many respects Canada and Mexico probably never thought that they were going to end up in this particular situation either but you only have to look at some of the cases that have been brought forward there to see they have. One is Metalclad v. the Municipality of Guadalcazar. In that particular case, the US corporation was awarded $US16.7 million because it was refused permission by a local municipality to build a 650,000-tonne per annum hazardous waste facility on land that was already so contaminated by toxic waste that local ground water was compromised. The site had previously been managed by a Mexican company and Metalclad had bought the land. But Metalclad applied for a permit to operate a toxic waste processing plant on landfill, which had previously been refused by the local municipality. After local protests, the governor of the particular state declared the site part of a special ecological zone, and I think we can see the irony in that. The reality, though, is that Metalclad sued the government of Mexico under the North American Free Trade Agreement, claiming that the actions of the municipal government amounted to expropriation without compensation, and the end result was $US16.7 million having to be paid to Metalclad.

There are other examples. One is Sun Belt Water Inc. v. British Columbia, involving Canada, where the US based company is in the process of suing Canada for $US10.5 billion because the Canadian province of British Columbia interfered with its plans to export water to California. Even though Sun Belt has never actually exported water from Canada, it claims that the ban reduced its future profits. This case reinforces the concerns of many Canadians that the NAFTA rules treat an essential service like water as a traded commodity. I think that these things are pertinent when you consider some of the COAG initiatives, particularly the creation of a national water trading system. There is already the treatment of water as a commodity. I know, for example, that occurs in many places, particularly in the Murrumbidgee Irrigation Area and the Coleambally Irrigation Area. So we are not talking about something that may happen; this is already starting to happen.

The list goes on: United Parcel Service of America v. the Canadian Postal Service and the issue of Ethyl Corp. v. Canada, about chemicals used as a fuel additive, which I think Senator Brown referred to yesterday. I wonder if the minister might care to respond to the issues raised in article 11.16.1, to give some explanation, given that the DFAT guide gives very little explanation, if anything at all, about what would trigger the process if, at some stage in the near future perhaps, a US corporation may get its foot in the door and may trigger the process, with the government having to respond by allowing consultations, thereby applying pressure to force the door open. So we will end up under the free trade agreement with the United States having exactly the same as what is in NAFTA: an investor-state dispute resolution mechanism. I do not think that anyone would want that, and I am sure that even my colleagues on the government side are probably not even aware that the door is slightly ajar and that it provides an opportunity for US corporations to be able to open that quite wide. So I think the government really needs to look seriously at this amendment because, unless the government is prepared to give an ironclad guarantee by ensuring that there never, ever is an investor-state dispute resolution mechanism by having an amendment of this sort, it can give no guarantees that this will not occur in the future.