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Thursday, 18 November 2004
Page: 17

Senator LUNDY (10:31 AM) —I welcome the opportunity to participate in this debate on the Thailand-Australia free trade agreement in my capacity as shadow minister for manufacturing. My colleague Simon Crean in the House of Representatives yesterday and, as you have just heard, my colleague Senator Conroy have discussed in great detail the broader issue of trade policy, contrasting Labor's approach with the Howard government's flawed trade policy, which is clearly not in Australia's best interests.

The Howard government is unable to handle the challenges and difficulties of multilateral trade negotiations. This government has resorted to a suboptimal path of a range of bilateral trade deals, such as the Thailand-Australia free trade agreement which we are debating. Throughout the coalition's term, the government has squandered the opportunity to drive the WTO Doha Round; been negligent in multilateral trade responsibilities; allowed the Cairns Group to drift and diminish in importance; and undermined regional trade by ignoring the capabilities of APEC. The Howard government has also been single-mindedly obsessed with the development of FTAs which have the effect of discriminating against our existing trading partners; offering fewer economic benefits than multilateral deals; being unable to tackle agricultural export and domestic subsidies; and dissipating limited trade negotiation resources that could be utilised to develop far more beneficial agreements through the WTO.

The government's failure in trade is evident in its record, and it is worth having a look at it. The current coalition government is responsible for Australia's worst trade performance in postwar history; a drop in the export of goods and services over the last three years; an average annual export growth of only 3.6 per cent, compared to 8.1 per cent growth under Labor; Australia's largest ever trade deficit of $24 billion and largest ever current account deficit of $47 billion. This effectively places upward pressure on our interest rates, which the coalition has promised to keep low! Foreign debt has nearly doubled under its reign and now stands at $393 billion—and we have a Prime Minister who has promised to reduce that debt.

Labor have repeatedly said that we will support bilateral free trade agreements if they are shown to be in the national interest and are consistent with advancing Australia's multilateral trade objectives. The government must ensure that the parliament and the public are fully informed of the content and implications of these deals when they are announced. With this in mind, I note that once again the federal parliament is dealing with legislation which has been brought forward to this place before the tabling of relevant committee reports.

In this case, the Joint Standing Committee on Treaties—which affords the parliament an opportunity to undertake at least some level of scrutiny of treaties before they take affect—has not yet completed its inquiry into the Thai free trade agreement. This is arrogant in the extreme. The government's disregard of the democratic processes afforded by the committee inquiry once again highlights the shallowness of the government's commitment to transparency in the treaty-making process.

That said, Labor has examined the agreement, finding that it offers improved access to Thailand for Australia's manufacturing, agriculture and services sectors. For this reason, Labor will be supporting the Customs Amendment (Thailand-Australia Free Trade Agreement Implementation) Bill 2004 and the Customs Tariff Amendment (Thailand-Australia Free Trade Agreement Implementation) Bill 2004, as has already been made clear. But consistent with the Labor amendment moved in the other place and in the Senate by my colleague Senator Conroy, Labor notes the government's failure to include provisions in the free trade agreement covering labour and the environment. If it was good enough to include a chapter on labour in the Australia-United States free trade agreement, then this agreement should also set out the obligations of both parties on labour issues.

The Australia-Thai free trade agreement fails to address the environmental obligations of each party under the deal. In stark contrast to the US free trade agreement, it does not include any reference to the concept of sustainable development or the importance of assessing the environmental impact of the agreement. That is why Labor's amendment is important, particularly in the context of this agreement not providing any protection for core labour standards, which are contained in the International Labour Organisation's Declaration on Fundamental Principles and Rights at Work. These standards include the right of workers and employers to freedom of association and the effective right to collective bargaining, conventions 87 and 98; the elimination of all forms of forced or compulsory labour, conventions 29 and 105; the effective abolition of child labour, conventions 138 and 182; and the elimination of discrimination in respect of employment and occupation, conventions 100 and 111.

The failure of the Howard government not to ensure inclusion of a chapter on enforceable core labour standards is particularly concerning in this free trade agreement, because Thailand has not ratified three of the eight ILO conventions containing core labour standards, including the ILO conventions relating to freedom of association and the right to collective bargaining. This failure to commit to ILO core labour standards must be seen in the context of the Thai work force where it has been observed that wages and conditions are generally low for most workers. Collective bargaining is uncommon. Wage increases for the majority of workers come from rises in the minimum wage rather than through collective bargaining. Minimum wages are set by provincial committees that sometimes include only employer representation. In 2003 the minimum wage ranged from 133 baht to 168 baht per day. This equates to around $A4.60 to $A5.80 per day. The low minimum wages are themselves poorly enforced. As a consequence, around one-third of the formal sector workers receive less than the minimum wage and migrant workers generally receive less than the minimum wage.

All members of the union executive must be full-time workers in an enterprise. This means that officials of a union must negotiate leave of absence with their employer to undertake any trade union work. Civil servants cannot join unions and are prohibited from taking strike action. Health and safety regulations are often poorly enforced and there is no law protecting employees who refuse to do dangerous work. The redress for workers injured in industrial accidents is not timely or sufficient. And so the list goes on.

All of these are genuine concerns. The coalition government had the opportunity to insert a reference to core labour standards in this agreement and they chose not to. The absence of such provisions is a damning indictment of the Howard government. The Australian government have a high level of moral obligation and responsibility to provide leadership, and this is one way they can do it. When engaging in free trade agreement negotiations such as this there is opportunity to assist those in other countries who are working in suboptimal standards.

In the context of these specific concerns I would also like to turn to the issues pertaining to manufacturing and the agreement's impact on this sector. Labor points to the fact that there has been a distinct lack of consultation with key parties affected by the TAFTA and very little or no social or economic analysis of the effects of the tariff reductions to be made under this agreement. It is quite easy to recall—it was not that long ago—the efforts of the Labor initiated inquiry into the US free trade agreement to have that economic analysis work done. There has not been any work like that done on this agreement and that leaves a huge gap in our ability to assess its impact.

Submissions to the inquiry undertaken by the Joint Standing Committee on Treaties indicate that the consultation process was inadequate, with no nonbusiness community organisations or trade unions consulted on the contents of the agreement. The failure of the Howard government to properly consult with all stakeholders, including the unions—despite representing the interests of tens of thousands of members who would be affected—is disconcerting, to say the least. It shows a level of arrogance that is completely unnecessary. Stakeholder groups such as trade unions are always going to take an interest in these free trade agreements and they do represent many members. It is the height of arrogance to somehow pretend that they will not have a view and to ignore their views. I think it shows a level of pettiness that is completely unnecessary.

Also of concern is that no detailed economic analysis of the likely effects of the agreement has been undertaken. Certainly there is no publicly available analysis of the likely effects of the agreement on any sector of the manufacturing industry. The effects of the agreement by state or region have not been considered, nor does any analysis appear to have been undertaken of the likely effects on wages and/or employment in Australia or Thailand. While the Centre for International Economics did conduct the only economic study available, it appears seriously flawed, failing to assess the impact on individual sectors. This is particularly worrying in terms of the manufacturing sector, given that the automotive and textiles, clothing and footwear sectors will be specifically impacted.

I will make a few comments on the automotive sector before I turn to the TCF sector. Australian automotive manufacturers have been identified as significant beneficiaries of the agreement. This sector currently confronts a tariff of 80 per cent on passenger motor vehicles and up to 42 per cent on automotive component exports to Thailand. Under the operation of the TAFTA on 1 January, Thailand will eliminate its tariff on large passenger motor vehicles that are above 3,000 cc and reduce its tariff for small and medium vehicles to 30 per cent. The tariff on small and medium vehicles will be phased down to zero by 2010 in five equal instalments. Thailand's import tariffs on most auto parts and accessories will be reduced to a ceiling of 20 per cent and then phased to zero by 2010. In Australia the agreement will eliminate current tariffs on all passenger vehicles, off-road vehicles, goods vehicles and other commercial vehicles of Thai origin. These tariffs are currently 15 per cent for passenger motor vehicles and five per cent for other vehicles. The general rate is legislated to fall to 10 per cent on 1 January 2005 and five per cent on 1 January 2010.

The Australian tariff on automotive parts of between 10 per cent and 15 per cent will in most cases fall to five per cent on entry into force of the agreement and then be eliminated by 2010. Tariffs on auto parts of five per cent or below will be eliminated on entry into force of the agreement. The metal workers union have specifically expressed their concern about this aspect of the agreement. I think it is important in this debate to note their concern in relation to automotive components and that of parts manufacturers, whose views are varied—there is not one homogeneous view in that group. Again, the distinct lack of interest shown by the coalition in properly evaluating the effects of the agreement on industries shows little respect for this sector and the TCF sector, which I will make a few comments on now.

In Australia the TCF industry currently benefits from a range of tariffs depending on the product. Under this agreement general TCF tariffs will fall to 17.5 per cent, 7.5 per cent, 10 per cent and five per cent, depending on the product, from 1 January 2005. The TCF Union of Australia, the TCFUA, has expressed concern about increased imports from Thailand following tariff reduction as well as the possibility of illegal trans-shipments from neighbouring countries. These concerns of this industry also need to be taken seriously.

Labor certainly recognises that Thailand accounts for at least a small proportion of Australia's textile imports. In 2002 Thailand accounted for only 1.3 per cent of all of Australia's clothing imports and 2.8 per cent of its textile imports. Given the small amount of imports currently purchased from Thailand, any increase is expected to displace imports from other sources, including China. It is important that the safeguard provisions be closely monitored to ensure that they effectively protect local industry against any damaging import surges resulting from the reduction or elimination of tariffs.

A key concern for many affected industries during the development of the agreement was the integrity of Thailand's borders. The concern is that Thai businesses could obtain cheaper goods from neighbouring countries, package them in Thailand and export them to Australia duty free. The TCFUA has also expressed concern about the rules of origin applying to TCF products. The agreement's rules of origin use a change in tariff classification with a regional value content level of 55 per cent. At least 30 per cent of the regional value content for these goods must be sourced from Thailand, while the remaining 25 per cent may be sourced from a developing country, but any content from a developing country is required to undergo the same change in tariff classification that is required for non-originating inputs. These rules of origin are similar to those normally applying to developing countries and were demanded by Thailand to enable its TCF sector, which includes a large number of SMEs, to access the tariff preference under the free trade agreement. The TCFUA is concerned that these rules of origin will be difficult to enforce and will enable large quantities of non-Thailand textiles to enter Australia under the FTA at the preferential rate. The government suggests that, given that the size of the tariff preference Australia has offered to Thailand for TCF is only five per cent or less until 2010, these rules of origin are not likely to lead to significant increases in imports from Thailand in the first five to 10 years after implementation.

What is also questionable is why the rules of origin in relation to the automotive sector are more lax in the Thai FTA than in the US FTA. In the US FTA, the rules of origin originally required a regional content value of 50 per cent. However, this has since risen to 62.5 per cent for automobiles, light trucks, engines and transmissions, and 60 per cent for other automotive products. It remains to be seen why, despite the Productivity Commission's 2002 Review of automotive assistance, report No. 25, reporting that average local content of Australian produced vehicles is around 75 per cent, the trade minister agreed to such a low rule of origin for passenger motor vehicles.

Having noted these concerns in relation to the manufacturing industry, particularly the automotive and TCF industries, and in the context again of reiterating the generally flawed process to trade policy that has been pursued by the coalition government, Labor believes there are grounds for support for this free trade agreement. I certainly commend to the Senate the second reading amendment moved by my colleague Senator Conroy, and I look forward to hearing other contributions.