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Thursday, 27 November 2014
Page: 9528

Senator GALLACHER (South Australia) (13:22): I too rise to make a contribution in this debate on the Customs Amendment (Japan-Australia Economic Partnership Agreement Implementation) Bill 2014 and the related bill.

Mr Acting Deputy President Bernardi, I might have mentioned to you previously that the Senate is a wonderful place and you come across information, which in the normal course of your life you would never, ever stumble across. I thank the Parliamentary Library as they are always a source of incredibly pertinent and succinct information.

The total value of Australian exports to Japan in 2013 was $47,501 billion; imports from Japan—$18,914 billion—so total trade, exports and imports, is around $67 billion. That is a significant figure from my perspective and, I suppose, for any elector in the street, it is a significant amount of money. It is instructive to note that, of Japan's principal destinations, we only rank at No. 10—we are 2.4 per cent of Japan's principal export destination; however, of principal import destinations, we are in the top three—it is China, United States and then Australia.

This is a critically important piece of treaty making, if you like, for the economic welfare of this country. As a member of the Foreign Affairs, Defence and Trade Legislation Committee, we sought some submissions in respect of the making of this treaty and the passing of the enabling legislation. I put the caveat up front that I am going to quote selectively from a group of people who made submissions. It is not my intent to alter their support or general goodwill towards the making of this treaty; it is for a specific purpose, which I will get to in the latter part of my contribution.

We go to the Australian Lot Feeders' Association. They say:

The JAEPA promises to deliver significant tariff reduction gains to the Australian beef industry in what is our largest export market. Under the JAEPA, the tariffs on frozen Australian beef entering Japan will drop from 38.5% to 19.5% over 18 years (with an 8% cut on entry into force (EIF)), while the tariffs for chilled beef will fall from 38.5% to 23.5% over 15 years—including a 6% cut on EIF.

Whilst falling short of the beef industry’s tariff elimination objective, modelling suggests that the tariff reductions will benefit Australian beef export sales by around $5.5 billion over 20 years and annual gross value of Australian beef production by up to 7%.

These are not small figures. The interesting thing is: why would country put a tariff on protein?

Fortunately, I had the opportunity to visit Japan and Korea last month. When that question was put to our ambassador, he simply said they have a recent history of famine in this country. There are still people around who can remember not having enough food, so food security is extremely important to them. They want to grow food or produce beef in their country. It is a particular type of beef for their palate, and they do not want to have to import all their food. That was particularly instructive for me, because I could not understand why you would pay $35 a kilo for beef when you can probably get it a lot cheaper. The second point is that farmers in Japan are a very powerful lobby group. In particular, members of the Diet will be more stringent and protective than some elements of our parliament here in respect of that. I respect that, so it was an instructive visit.

The Cattle Council said:

While the objective of total tariff elimination was not met, under the JAEPA there are significant tariff reductions which will have positive implications for the Australian beef industry.

Once again, the economic modelling takes it up to $5.5 billion over 20 years, despite the fact we will still have significant tariffs.

Senator Ludwig mentioned Australia Pork. They say:

APL welcomes the outcome for Australia's pork producers through the reduction (within quota) of the ad-valorem tariff on all fresh, chilled and frozen pork lines and Australia's exemption from Japan's global gate price safeguard.

However, APL questions the need for an arbitrary quota of 14, 000 tonnes when there has been no application of tonnage restrictions to date. Moreover, with recent annual Australian exports to Japan only a fraction of this quota, pork exports from Australia to Japan pose no threat to the profitability of Japanese pork producers. Given the JAEPA has already been signed, APL seeks that the Australian Government requests the abolition of the quota following the conclusion of the implementation period.

It goes on.

Very close to Senator Edwards and my hearts is the Australian wine industry, because we know—I don't think we will get any interjections or contention—that South Australia produces the best wine in Australia and, arguably, some of the best wine in the world.

Senator Bilyk: Bar Tasmania!

Senator GALLACHER: South Australia produces the best wine in Australia and, potentially, the best wine in the world. But we face a 15 per cent or 125 yen per litre tariff, whichever is the lower, on entering Japan. Unfortunately, the wine of Chile has attracted a preferential rate since 2008 and, as a result of the free trade agreement between Chile and Japan of the previous year, between 2008 and 2013, imports of Chilean wine to Japan increased from 13.3 to 36.4 million litres while imports of Australian bottled wine have fallen: 7.3 to 6.8.

Chilean wine, unfortunately, now constitutes about 20 per cent of the Japanese wine market with Australia contributing less than four per cent. Upon agreement, the tariff on Australian bulk wine exported to Japan will be eliminated upon entry into force. The tariff on Australian bottled wine will decrease in instalments over a seven-year period—only eight per cent of Australian wine exported to Japan is dispatched in bulk, so it is not a perfect solution for the Australian wine industry and, in particular, the greatest producer of that: South Australia.

The Minerals Council said:

No other option … exists at this time to deepen the Australia-Japan economic relationship. Without JAEPA, Australia would gradually lose competitiveness in important sectors of the Japanese market.

The Australia Japan Business Co-operation Committee clearly state:

The Australian ambition in all its trade negotiations is to eliminate tariff and other barriers to trade and investment. The AJBCC is very supportive of this ambition. The AJBCC has warmly congratulated each Minister and government official whom, over the seven years, worked tirelessly for the desired … outcome. Being a WTO comprehensive agreement amongst two sophisticated economies ensured that it would be a tough road. The result has been broadly welcomed across the sectors. Whilst for the present, not all aspirations have been met, the AJBCC welcomes the review mechanisms that have been incorporated within the Agreement as providing for the potential of earlier and/or further liberalisation.

RMAC state:

Whilst falling short of the beef industry's tariff elimination objective, modelling suggests that the … tariff reductions will benefit Australian beef export sales by around $5.5 billion over 20 years and deliver an increase in the annual gross value of Australian beef production by up to 7%.

These submissions all support the prompt passing of this legislation. Very importantly, they all make a similar comment. Another submission states:

These Japanese tariffs in our view are extremely high compared to other importing countries and a constraint on trade and cost on Australian beef processors and ultimately the Australian beef producer in servicing this market. The Australian beef processing sector has and continues to face increasing competition … from the United States.

So we have Chile, the United States and New Zealand in dairy. We are facing a situation where a large economy has great demand for our products and we are actually in these agreements competing with other countries for access. It is not a straight up and down free trade agreement. Some people do not realise that in a free trade agreement some items are free into Australia next year, lots of stuff is free into Japan this year and a whole swag of stuff will be subject to quite high and extraordinary tariffs.

That sets me up for the next part of my contribution. I foreshadow that the Senate Foreign Affairs, Defence and Trade References Committee has agreed to conduct an inquiry into the Commonwealth's treaty-making process. This morning I lodged in this chamber a notice of motion to refer this matter to the committee for inquiry and report by the middle of the year. The timing of such an inquiry, particularly in light of the growing number of bilateral and multilateral trade deals negotiated by both Labor and coalition governments, will enable the committee to examine such matters as whether there is scope for the parliament and parliamentary committees to play a greater and more meaningful role in negotiating, approving and reviewing treaties, whether the current mechanisms for consultation within and between federal and state and territory governments are adequate and whether there is room for improvement, whether there is scope for individual independent assessment, analysis and review of treaties both before and after implementation and, perhaps most importantly, whether the current process for public and stakeholder consultation with government provides an adequate level of openness, transparency and accountability.

Having said that, I accept that, under the Westminster system and the Constitution and consistent with the practices in other Westminster parliaments, the power to enter into treaties is an executive power within section 61 of the Constitution, and I do not see that changing any time soon. Hence this proposed inquiry does not intend to rake over the constitutional and legal grounds covered in great detail by the 1995 report of the Senate Legal and Constitutional Affairs References Committee entitled Trick or treaty? The Commonwealth power to make and implement treaties. However, it has become clear from some of the evidence received by recent parliamentary inquiries into the Korea-Australia Free Trade Agreement, the Japan-Australia Economic Partnership Agreement and, most likely in the future, the China-Australia Free Trade Agreement and the Trans-Pacific Partnership that many of the concerns raised in the mid-1990s about a so-called democratic deficit—a lack of public consultation and parliamentary scrutiny in the treaty-making process—remain as strong, if not stronger, than ever before.

It has been nearly 20 years since wide-ranging reforms to the treaty-making process were introduced as a result of the Trick or treaty? report's recommendations. The tabling of treaties in parliament at least 15 days before binding action is taken, the preparation of a national interest analysis and the establishment of the Joint Standing Committee on Treaties, JSCOT, were all significant changes and improvements to the process at the time—I acknowledge that—yet it has been nearly 20 years since a Senate committee has looked exclusively at the way Australia negotiates and enters into treaties from the perspective of the community and stakeholder engagement during the initiation and negotiation phase of treaty making. That is the nub of the matter for this proposed inquiry by the Foreign Affairs, Defence and Trade References Committee. I believe it is time for the Senate through a public inquiry process to have another look at the 1996 reforms to see if there are opportunities for more openness, transparency and accountability in the way that treaties and in particular free trade agreements are negotiated between Australia and foreign governments.

I know—as you do, Acting Deputy President Whish-Wilson—lots of people who have a view on agreements. They come from their particular points of expertise, involvement or business. It is not hard to find fault with the treaty-making process that we have in Australia if you have a siloed approach or you have a particularly strong view—maybe on the manufacturing of motor vehicles in Australia. It is not hard to find people who say that free trade agreements are wrong.

It is our job in this place to get across all of the detail that we can. The democratic deficit that has been alluded to in this contribution—as you well know, Acting Deputy President, with the TPP—is that it is almost impossible to get advice about what is being negotiated prior to its being tabled here for enabling legislation.

I think that trade is important to this country, and the benefit is easy to quantify and articulate in aggregate. In aggregate it is clear that we do very well with Japan and we do very well with Korea. It is interesting to note that some 30-odd per cent of Japan's imports from Australia are as a result of their nuclear shut-down. The LNG is now going into Japan and having a detrimental effect on their national budget. That may well change in the future, when 20 of those nuclear stations come back on line.

But I think it is incumbent on everybody on this place who has an involvement in these areas to get across some of the detail and to understand that the complexity that the department has in negotiating these agreements. One case that comes to mind is the honey industry—the beekeeping industry in Australia—who do not benefit from access under these agreements. When asked, on notice, whether the department simply forgot about the honey producers of Australia, the answer was. 'No; we did not forget about them; it was just that the other side was insistent on not allowing Australian products into that market.' That is a little strange for our side of the table to accept, when, as the treaty processes through, we will be accepting zero tariffs on motor vehicles from Hyundai or Kia but we cannot even get a bucket of honey into Korea. It seems as if there is no logic in all of that.

However, they have a very strong view on their domestic sectors. Quite clearly, they are prepared to make their populations pay more for staples such as protein than we would be prepared to accept here in this country. I have experienced first hand the ongoing battle that our negotiators face. We had a session in the Japanese parliament and I said, 'Why do you tax your people for beef? Why do you have a tariff on protein in a country as wealthy as this?' The answer is, as I said before, that they have a very politicised sector. They have a very vigilant sector that protects itself. There is a history in the country of people going without food. They do not want to have all their eggs in one basket. They want to have food security, and that involves producing some themselves.

So Japan does not buy all of their coal from one place; they do not buy all of their gas from one place. They spread it out a bit. They do not want to be beholden to any particular market place. But we are pre-eminent in that space. We are one of the best trading partners Japan has. That was very clear from all of the politicians I met, along with the rest of the delegation in the Japanese parliament. They like our wine. They like our gas. They like our coal. They like our iron ore. We are a reliable trading partner. Somehow or other, we need to be able to push them a bit harder on access for or agricultural products, because we are probably not doing as well as we could.

I complimented the chair of the foreign affairs trade committee of the diet on his negotiations in agriculture. I said, 'You've done very well, because we would have preferred these tariffs to come down a whole lot quicker.' And even in the translation the irony was not lost. They did laugh. They know perfectly well. Our treaty makers—our negotiators—are doing a damn good job and are pushing as hard as they can.

My only comment is that there is not enough transparency in the system. We are not taking every stakeholder with us. If this inquiry that we have foreshadowed is able to put some recommendations up to improve the treaty-making process then this Senate will have done its job.