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Foreign Affairs, Defence and Trade Legislation Committee
24/10/2019
Estimates
FOREIGN AFFAIRS AND TRADE PORTFOLIO
Tourism Australia

Tourism Australia

[19:24]

CHAIR: While we're waiting for the officials, Senator Birmingham, isn't Tourism Australia doing the new film with Chris Hemsworth? Is that not part of Tourism Australia?

Senator Birmingham: Chris Hemsworth was a big part of the recent US campaign and, indeed, still continues to cooperate in a number of ways.

CHAIR: Right. Okay.

Senator Birmingham: As officials take their seats, I particularly welcome the new Tourism Australia chief executive, Philippa Harrison. Obviously I've had the chance to congratulate Pip before, but, in the committee setting, I congratulate her on her appointment. I'm sure the committee will look forward to working with Ms Harrison.

CHAIR: Ms Harrison, welcome and congratulations on your new appointment.

Senator Birmingham: Sorry, I should pay tribute to John O'Sullivan as well, who I think left without the opportunity of a farewell appearance here. John goes with all of our blessings and thanks for his outstanding work.

CHAIR: Thank you, Senator Birmingham. Likewise, we congratulate and thank him for his attendance and for his service to Tourism Australia. Ms Harrison, do you have an opening remark?

Ms Harrison : I don't.

CHAIR: No? Okay. Senator Farrell.

Senator FARRELL: Congratulations, Ms Harrison, on your appointment to the position. I wish you luck in the role. Some of these questions relate to issues that arose before you started in the job, so if you don't feel that you're sufficiently in a position to answer them then please feel free to take them on notice. Could you please detail the most recent total expenditure by US visitors to Australia?

Ms Harrison : The total expenditure from the US market—is that what you're asking for?

Senator FARRELL: Yes.

Ms Harrison : Numbers from the US are doing well. The US is our third-largest market and second-largest in terms of spend. Over the last 12 months we have seen that numbers from the US have risen by 4.6 per cent, so we are now welcoming 816,000 visitors. But you asked me a question about spend. The spend for that market is up—

Senator FARRELL: Sorry to interrupt you there—you said 816,000 visitors?

Ms Harrison : Arrivals—correct.

Senator FARRELL: That's up close to five per cent from the previous year?

Ms Harrison : That's right—4.6 per cent. Our spend is also going in the right direction. For the 12 months to the end of June 2019, it was $4 billion, and that is an increase of nine per cent.

Senator FARRELL: You said $4 billion?

Ms Harrison : That's right.

Senator FARRELL: How is that tracking in relation to the target set for US visitations on the back of the 2018 campaign?

Ms Harrison : The potential for 2020 is between $4.5 billion and $5.5 billion. We did have a target for the Dundee campaign that was around the $6 billion mark. It was a long-term target.

Senator FARRELL: $6 billion?

Ms Harrison : That's correct.

Senator FARRELL: $4 billion is well short of that.

Ms Harrison : It is.

Senator FARRELL: Are you disappointed with the campaign so far?

Ms Harrison : We had a number of metrics to measure success for the Dundee campaign. For visitation, the period of time from being in a 'consumer choice' set to 'intention to travel within the next couple of years' to 'actually travelling' is sometimes years. We did set some long-term targets, but we also had some short-term targets around the campaign. We had some that were at six months and 12 months, and we've tracked really well against those. We're a platform for industry. In all of the work that we do, we measure our success in terms of how the industry is going. The industry has done really well out of the Dundee campaign, and is reporting great increases. So, we might not—

Senator FARRELL: But clearly not as well as you had hoped?

Ms Harrison : We still have a year to go, you know.

Senator FARRELL: The four billion is to what period of time? The middle of this year, is it?

Ms Harrison : That is to June 2019, so we've got another 18 months to go.

Senator Birmingham: And that is a nine per cent increase so far.

Senator FARRELL: Obviously the value of the dollar has been down so that's an attraction in itself for people to come, and if they come then the money they spend here is worth more. Do you think we'll get to that $6 billion? Are you still of the view that that's a realistic target?

Ms Harrison : Look, I can tell you that we will continue to work very hard towards that target, because it's one that we have set. We continue to put considerable focus on and effort into the US market because it is one of our star markets. We see that it has a lot of growth, and it's got the right sort of growth. There are a lot of high-value travellers in the US market. We are seeing some really great aviation developments coming up between the US and Australia, and there is a strong correlation between aviation growth and visitation.

Senator FARRELL: You're talking about the direct link between New York and Sydney—is that what you're talking about? Or are you talking about extra capacity?

Ms Harrison : No, I'm talking about how Qantas has several routes that are planned, that are coming. They have Brisbane to San Francisco; they have Chicago to Brisbane. Now that the antitrust has been signed, we know that America is looking at other possibilities. United Airlines are looking to develop more routes as well. There is increased capacity coming, and that is always a good sign for increased visitation as well.

Senator FARRELL: Given that we've only got 18 months to go and we're $2 billion short of the target, what do you think are the things we should be doing that ought to get us there to that target, if you still believe we're capable of reaching it?

Senator Birmingham: Senator Farrell, you must appreciate the first phase of the campaign was only in February 2018, so this is, in many ways, still a mid-point of the campaign in that sense.

Senator FARRELL: But is there any evidence that it's ramping up? Are there any indications that the shortfall, I suppose, that we find ourselves in at the moment is in fact going to be ramped up in the next 18 months by things that haven't yet occurred?

Ms Harrison : The interesting thing about the US market is that in the couple months after Dundee we actually saw a decrease from the US market, so that 4.6 I'm talking about is a 12-month number, but we have seen recent spikes. Those spikes are eight and nine per cent. It's looking good. Aviation is looking good. There is high demand for travel to Australia. We have a lot of activity planned in that market. We will work as hard as we can towards that target.

Senator Birmingham: Senator, the latest Home Affairs figures show for the year ending June 2019 that US visitor visa grants were up 10 per cent compared to the previous year. Obviously visas are a lead indicator—

Senator FARRELL: Are these American figures that you're talking about?

Senator Birmingham: These are Australian Home Affairs figures of US visa grants, so grants of visas to US citizens.

Senator FARRELL: Could you repeat those figures for us?

Senator Birmingham: For the year ending June 2019, US visitor visa grants were up 10 per cent compared to the previous year. Obviously, visas are issued in advance of travel.

Senator FARRELL: Sure. I suppose that's consistent with a nine per cent increase, isn't it?

Ms Harrison : We also have a tool that looks at forward bookings, aviation bookings. They are looking at double-digit increases. I'm not going to give you a number now because I'm not sure what it is, but I can take it on notice if you're interested in that too.

Senator FARRELL: I would be interested in that. Where do you get those figures from?

Ms Harrison : It's a system called ForwardKeys. It does a screen scrape of the GDSs. It's not 100 per cent of the bookings, but it gives you a really good indication. I think we get 66 per cent of the flights that are booked between the US and Australia, so it gives us a really good indication of forward bookings.

Senator FARRELL: Looking more broadly, beyond the US market, could you tell us what the biggest barriers are for international visitors coming to Australia?

Ms Harrison : Sure. There are a couple. There's a very rational one, which is around the time, distance and cost that it takes to get to Australia from a lot of areas in the world. That's nothing new; that's something that we've always had to overcome. There are a couple of other barriers that I would point to. One of those is the complexity of Australia as a destination. We're a large land mass—we're the same size as Europe; we're the same size as the US; we have different seasonality—but people see us as one destination and so when people come to book their travel, there is a lot of complexity around where to go, what to see, what to do. Our job is to reduce that complexity.

The other thing we see as a barrier—

Senator FARRELL: Just stop there. How do you think we should address that particular issue?

Ms Harrison : How do we address the complexity issue?

Senator FARRELL: Yes.

Ms Harrison : We have a range of initiatives that we undertake to reduce the complexity. A lot of travel to Australia is still booked through the trade, and that is because we are a long way away and, with multisector holidays, people do tend to book through the trade. We have the Aussie Specialist Program, which we work on in conjunction with the states and territories, and that's an e-learning program that really helps people understand Australia beyond the icons. We have about 34,000 Aussie specialist agents signed up around the world, and we also have 23 trainers based in our offices around the world and their job is to go around and train travel agents and really help them unpack what it is that the Australian tourism offering is.

Senator FARRELL: How many people do you have doing that?

Ms Harrison : Twenty-three.

Senator FARRELL: Okay. There's a document called the World Economic Forum Travel & tourism competitiveness report 2019. I think we're ranked seventh out of 140 countries in the overall areas, but in the area of price competitiveness we're ranked No. 130 out of 140. Do you want to talk about that particular aspect of the issue of tourism and what we might be able to do to improve our position in that regard?

Ms Harrison : For us, the whole price thing is really around creating a value proposition. People will pay for things that they value highly, and you only need to look at the latest iPhone to know that. We can't change the economics of what things cost, but we can create value and get people to value a holiday in Australia by showing them that this is something that they really need to do today—not some day, but today—so that they will invest in that.

We have found that the audience that we target, the high-value travellers—and that's not just high-net-worth individuals; it's people who really value what we have to offer—when they come here they stay longer and they disperse further. The people in that market, for us, are the people we are targeting in terms of trying to show our value proposition for Australia. I guess that was the long way of saying we can't affect price, but what we can do is try and increase the value proposition of Australian tourism.

Senator FARRELL: Have any of the stakeholders raised this particular ranking issue with you, and the fact that we're so low in the rankings in this regard?

Ms Harrison : You're the first one, Senator.

Senator FARRELL: I'm the first one! Okay.

Ms Harrison : We engage with trade globally, and they do talk to us about the pricing in Australia. We're a large landmass but a small country, and we don't want the profitless volume that other destinations are seeing. We want the high-value traveller and the people who are going to come here and really appreciate what we have to offer. I don't see it as necessarily a terrible negative.

Senator FARRELL: Have you raised it with the government, the fact that this ranking is low and whether they can be of any assistance to you in solving the problem?

Ms Harrison : I haven't raised it with the government, because you just told me about it!

Senator FARRELL: It gives you an opportunity then!

Senator Birmingham: Sorry, Senator Farrell: is it a ranking of the affordability of a destination?

Senator FARRELL: We have this measurement, the World Economic Forum's Travel and tourism competitiveness report. Australia ranks reasonably well overall—seventh out of 140 countries. The worst-performing area is in this area of price competitiveness, where Australia is currently ranked 130 out of 140 countries. The pillar shown here measures how costly it is to travel or invest in this country.

Senator Birmingham: We are, obviously, a long-haul destination for most travellers from around the world. We're a country with high wage rates relative to many of our competitors and we have high environmental standards. Ultimately, all those factors contribute to being a higher-cost destination. That's why, as Ms Harrison rightly outlined, our strategy in our marketing is of course to target higher-value travellers because they are the ones who can afford to undertake long-haul travel to First World countries with a higher cost basis, as we have.

Of course we want to be as competitive as we possibly can, and so in that sense all the different areas of government policy settings in terms of red tape reduction and those sorts of things can help industry to be more competitive. Through Austrade, we have a number of senior investment advisers who have been very successful in attracting additional accommodation stock to Australia. Those new hotels and new accommodation offerings, as well as new economy accommodation offerings, create more competitive accommodation options for potential visitors as well. As you referenced before, the fluctuations in the dollar currently give us a slight advantage relative to where we were in terms of the cost for some currencies against Australia. But that doesn't change the fact that we're still a long-haul destination and a First World country, with relatively high costs compared to others.

Senator FARRELL: Yes. The particular areas which this report identified as impediments, I guess, and among the reasons why we are lowly ranked in this area, are ticket taxes and airport charges. Have those issues been raised with you, Ms Harrison?

Ms Harrison : They come up in the trade from time to time, sure.

Senator FARRELL: Have you raised that with the government and brought that to their attention?

Ms Harrison : If we get feedback from the trade on policy issues, obviously, we feed it back. But we're a marketing organisation and our job is to sell Australia and the experiences that Australia has to offer.

Senator FARRELL: Yes. But when people are specifically identifying problems and they do relate to issues over which the government has some control, it would be appropriate to raise them with the government.

Ms Harrison : And, as appropriate, we do raise them. But about that whole value proposition piece: when people come here we do a lot of research with them before they come and after they've left. People always go away saying they've had a great experience. They think they've had value for money and they get it. I think that's a great litmus test.

The other thing is that I think we're just unashamedly a high-yield destination. That's the market that we've gone after and that was our target in the Tourism 2020 strategy, and it's going to continue beyond that. We're doing well in that area. We rank—

Senator FARRELL: We're not doing that well, with due respect, in the United States market, because we're not getting close to our target.

Ms Harrison : No, I disagree; I think we're doing really well out of the US market. We've seen a real bump in visitation.

Senator FARRELL: We're rising, but we're not meeting what we thought was going to be the target, are we? And in all honesty—

Ms Harrison : Our initial 2020 target was $4.5 billion to $5.4 billion, so we will hit that original 2020 target. We will get there.

Senator FARRELL: Yes, but the $6 billion is looking a long way away, isn't it?

Senator Birmingham: Senator Farrell, we're about halfway through that particular campaign—

Senator FARRELL: A bit more than halfway, Minister.

Senator Birmingham: and nine per cent growth out of the US, a relatively mature market for Australia, is certainly not growth to be sneezed at.

Senator FARRELL: No, I'm not criticising it from that point of view. I'm just saying we had a target and we're still a long way away from that target. In fact, we may not reach that target. I hope we do, like you, but we may not. That completes my questions.

Senator Birmingham: Senator Farrell, I would just add to two points you raised, in terms of taxes and import charges. The government implemented a policy to freeze the passenger movement charge a couple of years ago, and that freeze is still in effect for I think it is another couple of years. We absolutely have heard industry in that regard, and acted in relation to airport regulatory charges. As I'm sure you would be aware, the Productivity Commission has just concluded some work in that regard, which the government will respond to shortly.

Senator FARRELL: Thank you.

CHAIR: I think Senator Van has some questions for Tourism.

Senator VAN: I do indeed. We're all aware that working holiday-makers are crucial to the Australian economy, particularly in our rural and regional areas. How are working holiday-makers contributing to our economy, particularly in those rural and regional areas?

Ms Harrison : Working holiday-makers are a really important category for inbound tourism, tourism into Australia, and there is no doubt that we have seen a decrease in working holiday-makers over the last period of time. We did receive additional funds to try to arrest this decline and move it into growth again. One of the things that I wanted to say, before I get into some of the numbers, is that all of the campaigns we do are very researched and data driven, and so, when we looked at how we were going to approach the working holiday-maker issue, we did some research into it and we found that it was a category issue; it wasn't just an Australian issue. Globally, working holiday-maker numbers were going down in our competitor destinations like Canada, the US and New Zealand. While youth numbers were going up, working holiday-maker numbers were going down, and they were going down because young people were concerned about taking a year out of their life, or two years out of their life, and getting behind their contemporaries on the career ladder. Our latest campaign, called 'Australia Inc.', was around addressing that issue, showing them why 'Australia Inc.' was the best workplace in the world. They can come and spend a year with us and not only have a great time but also get an incredible CV that is ahead of their contemporaries when they go back. That's what we're doing around it.

In terms of the numbers, overall numbers for working holiday-makers for the year ending June were down two per cent. There were 301,300 working holiday-makers. But spend was actually two per cent up. This is a $3.2 billion contributor to the Australian economy, so it's really significant one. And as you said, Senator Van, they do disperse into the regions, so they are really important for regional dispersal as well. But it continues to be something we are working on and it continues to be a category that we need to focus on.

Senator VAN: Thank you. What has been the uptake of the second-year visa over the last couple of years?

Ms Harrison : I'm going to have to take that one on notice, because I don't want to tell you figures that aren't correct. I will take that on notice.

Senator VAN: By all means. Are you able to tell me how the Working Holiday Maker visa program has changed since 1 July? What are the expected benefits of this change?

Ms Harrison : I might just take that on notice as well, thank you.

Senator VAN: By all means.

Ms Harrison : There were some changes in terms of ages in different countries. But I just don't want to quote anything that's not correct, so I'll come back to you.

Senator VAN: On notice is fine, thank you.

Senator Birmingham: There's a third-year offering that is contingent upon the amount of time spent working in designated regional areas and relevant businesses there, which I gather is warmly welcomed by those who are spending a fair bit of time in the regions, as we want from that program. The technicalities of the visa settings and the application of them are, of course, administered by Home Affairs, hence the fact that TA will come back on notice in terms of some of those more technical issues.

Senator VAN: Understood. Thank you, Minister.

CHAIR: Thank you to Tourism Australia. Ms Harrison, we wish you well in your endeavours.

Ms Harrison : Thank you.

CHAIR: Thank you. We'll see you again at estimates.

Ms Harrison : I hope so!

CHAIR: We're going to proceed to the rest of trade.

Senator FAWCETT: Minister, would you like me to wait until we have appropriate officials, or should I throw a question at you?

Senator Birmingham: Why don't you kick off and we'll see how we go.

Senator FAWCETT: It actually links back to a question that I asked you in the Senate regarding geographical indicators. There's been concern and questions from some people in industry about what that actually means, particularly in the dairy industry. I'm just wondering, as we are now partway into the process, whether you have an update for us in terms of where that whole process range, geographical indicators and the ability for people to lodge objections to some of the discussions around that, is up to and what it means for the dairy industry.

Senator Birmingham: Certainly. As you would be aware, the government's published a list of approximately 400 terms that the EU provided as part of the trade negotiations. These are demands the EU make in all of their trade negotiations for the recognition of geographical indicators. We have not agreed to recognise any geographical indications, but what we have done is publish this list of around 400 terms for industry and community feedback. It's essentially an objections process for people to identify what they would be most concerned about, the reasons why and any alternatives that they might suggest in the consideration of that. Slightly more than half of the terms are spirit terms and slightly half are food product terms. The objections process is continuing, and I'm sure that Ms Burrows will be able, in a second, to say when that deadline concludes.

We made the determination to not publish, as part of that process, any wine terms sought by the EU. That's because Australia already has a history in terms of our wine agreement with the EU. These terms were negotiated for protection around a decade ago. Parts of the EU still continue to seek protection of some wine terms, but our position is that they ought to use the provisions in that existing wine agreement to do so rather than conflate, at this stage, with the FTA process. Once the objections process is complete, government will obviously review the feedback there, and that will then shape the negotiations that we have next year with the EU in terms of whether we are willing to agree to the recognition of GIs. If so, what GIs, and under what terms. But beyond that, Ms Burrows?

Ms Burrows : I was just going to add the date. Our objections process closes on 13 November. Stakeholders have until then to put in their concerns and their specific objections about the list of GIs.

Senator FAWCETT: Is that information available in terms of how they do that? Is it through their industry associations or directly through your website?

Ms Burrows : Through the DFAT website. We have all the information set out, and we've tried to make that the primary source of information so that it's consistent. But we've also reached out to many stakeholders to tell them about the process.

Senator Birmingham: The department has been running a series of consultations around the country. I have visited more cheesemakers than is healthy to have done so in—

Senator FAWCETT: Blessed are the cheesemakers!

Senator Birmingham: Blessed indeed are the cheesemakers! For anybody who would like to be in Adelaide on the weekend, CheeseFest, which I will be paying a visit to as well, is coming up. It's a hardship post, but somebody has to do it!

Senator FAWCETT: Udder Delights is the name of the company in Adelaide Hills that you should visit. On the EU FTA, Ms Burrows, is there a current time frame that you are hoping to achieve? We had originally been told the 2020 calendar year, possibly in the first half. Is that still where we are aiming?

Senator Birmingham: The government's ambition is to see conclusion by the end of 2020. As soon as we can would be great. Clearly, like all negotiations, it takes two to tango. Whether that is achievable will depend, as we go through the process, on the quality of the offers that are made. In terms of the detail of negotiations, Ms Burrows and her team and her counterpart from the EU have been making great progress around a number of areas—the technical negotiations and formulating the text. Obviously, finalising any agreement depends upon us being able to make the assessment at the end that it is the best agreement we can get, that is in the national interest to proceed with. We'll make that judgement, I hope in a positive way, sometime well into next year.

Senator FAWCETT: Whilst there has been talk around Brexit and a possible FTA with the UK, my understanding is that it's still a priority for the government to pursue the EU FTA, and the other one, if and when it comes, down the track.

Senator Birmingham: Absolutely. The European Union, whether it's comprised of 28 or 27 nations, is one of our largest trading partners, one of our largest investment partners and a very significant market for potential future growth. Our commitment to the EU FTA will not been moved one way or the other by outcomes in relation to Brexit. Obviously, Brexit outcomes will have an impact on how and when we might proceed with a FTA with the UK. We stand ready and willing to launch those negotiations as soon as the UK is in a position to do so.

Senator FAWCETT: Thank you.

Senator KITCHING: I would like to ask some questions about the WTO appellate body breakdown. How many WTO cases is Australia currently involved in?

Mr Mina : Currently, we are a principal party in four cases and a third party in 19 separate cases. Of the four in which we are a principal party, we are the complainant in two; they are against India on their sugar subsidies and against Canada on marketing and distribution arrangements on wine. We have two cases in which we are defending our policy settings; they are in respect of tobacco plain paper packaging and the application of our trade remedies system to a measure relating to Indonesia and copy paper.

Senator KITCHING: Sorry, Indonesia and—

Mr Mina : Copy paper—the exports of paper from Indonesia.

Senator Birmingham: A4 copy paper. I think it is literally that precise, isn't it?

Mr Mina : Precisely.

Senator Birmingham: Not just any paper but the actual size designation.

Senator KITCHING: That's very particular! How is the action against Canada regarding wine labelling going? Where's it up to?

Mr Mina : It's proceeding well. The panel has already commenced work, and there have also been some negotiations with the Canadian government simultaneous to the dispute which have yielded a very positive result in respect of one province's discriminatory measures; they are the measures in British Columbia. The Canadian government and the Australian government have agreed that Canada will remove British Columbia's discriminatory measures from 1 November this year. As a result, we're not going to go ahead with prosecuting our interests in respect of that province. There are concerns that we have in respect of four provinces, including British Columbia, and at the federal level. We have had one hearing in that case, and we continue to pursue that case. We've got another hearing scheduled in December this year.

Senator KITCHING: And the action in India—that was on sugar, wasn't it?

Mr Mina : Correct. The situation in respect of the case we have taken against India is that we are alleging that certain measures in India's domestic support and export subsidy measures are inconsistent with WTO rules. At an early stage, in respect of that dispute, after quite extensive representations diplomatically and at an officials level—over 40 representations by the government at ministerial level and officials level—we've moved to dispute with a couple of other countries; Brazil and Guatemala are joining us in this action. We are at the panel formation stage. The dispute settlement panel was established just two months ago, and we're now at the stage where we are appointing members to that panel—so it's still very early stages.

Senator KITCHING: Do Brazil and Guatemala have identical grounds?

Mr Mina : They are almost identical grounds. For procedural reasons, the Indian government has sought that they be dealt with separately, but they'll be effectively moving on a consistent track and, ultimately, we expect, possibly merging.

Senator KITCHING: Is the Australian government actively considering initiating any WTO cases?

Mr Mina : We are always reviewing our rights in respect of WTO law, but it is fair to say that we've never had a case load quite as significant as the one we have at the moment. We are very firmly focused on moving through this case load.

Senator KITCHING: In relation to that, have you had any representations from industries or sectors of the economy in relation to the bringing of WTO cases—any that are compelling?

Mr Mina : The most compelling and most recent, of course, was India. There was a very considerable feeling in the Australian industry that we were not going to get policy change, from the kind of interaction we'd had with the Indian government until that time. Nothing has been quite as prominent in industry concerns, but, as I say, we're in constant conversation with a range of industry sectors. But there's no particular case that is compelling that has been brought to the government's attention in quite the same way recently.

Senator KITCHING: Has the department made any representations to the US regarding the WTO appellate body?

Mr Mina : Yes, we have.

Senator KITCHING: What representations have you made?

Mr Mina : We are not alone, but Australia has been a consistent supporter of the WTO dispute settlement system, including its system of appellate review. We believe it is a crucial element of the enforceability of the public international law of trade. We have been concerned, and have expressed our concern on a number of occasions in Geneva and elsewhere, about the blockage of appellate body appointments, which risks seeing the appellate body unable to hear new cases from mid-December this year. We have expressed that concern in a very explicit way. We have also worked very closely with our US partners, in expressing to them our commitment to a reform of the appellate body. They have consistently argued for an appellate body that's more responsive to the membership. That's a cause in which we would join, as would several other members. We have indicated to them our willingness to work closely with them as partners in that reform project. At the same time we've asked them to consider releasing that blockage on appointments to allow the body to function from December this year.

Senator KITCHING: When you talk about responsiveness do you mean in terms of time? So not an undue haste but that the body would become more expeditious.

Mr Mina : These issues become very technical very quickly. But I will summarise by saying time is a factor, as is the general question of judicial activism and overreach, which has been a concern for a number of members, including Australia for a number of years. We've expressed our concerns in the Geneva setting and the so-called dispute settlement understanding review. Those concerns have not led to any change. The US is using unconventional tactics. We are very like minded in respect of the kind of reforms we might like to see to improve that responsiveness, both in respect of time and in respect of the role of the body being tightly defined. But at the same time we've asked the US to reconsider its tactics for forcing this change, as we don't believe that the hold on appointments is the most appropriate way to drive those negotiations forward.

Senator KITCHING: Usually you have to bring people with you. Did the Prime Minister address the WTO appellate body and its functioning during his visit to the US last month, and perhaps Ms Adamson might know any detail around that? Mr Mina, were you on the US—

Mr Mina : I wasn't on the visit. What I can say is of course at various different ministerial interactions we have had with the US we've expressed our concerns on this issue.

Senator Birmingham: Some of his remarks certainly went to WTO reform. The exchange with Senator Wong earlier touched on the fact that that reform is not the one factor that was the focus of the exchange. The reform goes to other areas, which Mr Mina addressed in his response to Senator Wong, around transparency, dispute resolution and—help me, George?

Mr Mina : I think the last one would be this question of rule making, the revival of rule-making.

Senator Birmingham: Yes, rule making. So in that sense the consistent dispute resolution is part of that. I think the Prime Minister addressed the importance of reform to the WTO to ensure its functionality. I'll leave it to Ms Adamson whether she is aware that he went to the detail of the appellate body per se. I'd be surprised if he did, personally.

Ms Adamson : Not that I recall at that level of detail. At all levels we have quite strong advocacy in favour of the sort of reforms that we've outlined in more detail here. Certainly that's a point the Prime Minister has made consistently also.

Senator KITCHING: Has the department given industry advice about the WTO appellate body? And, I guess, vice versa has industry expressed views about that body?

Mr Mina : We have kept Australian industry that is engaged in trade policy—and we have regular stakeholder consultations with a wide range of industry peak bodies—very much informed of developments in respect of the appellate body. We have heard equally, as you've intimated, in the reverse direction some advice from industry about the extent to which they value the system.

Senator KITCHING: Just going back to, if I can put it this way, the dwindling numbers on the appellate body. What happens if you're an Australian business? Do you have any recourse if you're an Australian business and you're caught by the fact that there are fewer numbers on the appellate book?

What is going to happen at that point, or do you think it will fix itself?

Senator Birmingham: There is a practical threat, Senator Kitching, which we have emphasised through the WTO and through other advocacy methods over, certainly, the last year or so that I've been in the job and no doubt beyond. It is a two-stage dispute resolution process. Any panel finding out of a WTO dispute can be appealed to the appellate body. If the appellate body, as may be the case in December, becomes incapable of forming a quorum to hear an appeal, that doesn't change the rules that allow a panel finding to be appealed; it just means that there is nobody to hear that appeal. It then, potentially, sits in a void as such.

That is the practical concern that we and other nations have about the outcome of a failure of the appellate body to be able to function and hear appeals. If countries choose to exercise that right to appeal, their being without alternative means available becomes a void that sits there. There are processes that can be adopted by countries to create or establish alternative means, but the Australian government's view is that it is a less than ideal circumstance if we have a vast array of inconsistent alternative means for appeals to be resolved. A common approach is one that gives certainty to everybody.

Senator KITCHING: Absolutely. I might leave it there, Chair. Thank you very much. I hope, in February estimates, the appellate body is flourishing once again!

Senator AYRES: I have a series of questions about the Indonesian agreement. I'll touch on, Minister, so that you're aware, the letter you wrote to the Labor shadow minister for trade in due course. Then I've got a series of ancillary matters. Firstly, if I might, is it correct that the Indonesia free trade agreement was originally supposed to be signed in 2017?

Senator Birmingham: It predates me, Senator Ayres.

Senator AYRES: Everything predates me!

Ms McCarthy : I don't have any recollection of the FTA with Indonesia, that it was supposed to be signed in 2017. No, I don't have any recollection of that.

Senator AYRES: Negotiations did break down in 2018, though, didn't they?

Ms McCarthy : It was earlier than that. I'll just go back to when the negotiations started. The start of negotiations was some time ago, and then there was a hiatus in the negotiation. And then it picked up—

Senator AYRES: When you say 'hiatus' do you mean the negotiations stopped happening?

Ms McCarthy : They stopped happening, essentially, yes.

Senator AYRES: What caused that to happen?

Ms McCarthy : That was a long time before my time, I'm afraid.

Senator Birmingham: Negotiations were actually concluded in 2018.

Ms McCarthy : Yes, that's right.

Senator Birmingham: The agreement was then signed earlier this year after the legal—

Senator AYRES: The negotiations were concluded but there were certainly some question marks over the agreement in 18 October, following what the Prime Minister had to say about the embassy—

Senator Birmingham: Those were not matters of negotiation, in terms of the agreement.

Senator AYRES: So negotiations were substantially concluded before then?

Senator Birmingham: Negotiations were concluded in 2018, in the second half of 2018. Then there is a process, for any of these agreements, of what's called the legal scrubbing of the text, where, yes, we've agreed all of the terms but you've then got to make sure that it's reflected appropriately in the agreement. In the case of doing an agreement with Indonesia, it required that process to be run in both English and Bahasa at the same time. And, obviously, then it was signed, I think, in February this year, if my memory of my travels is correct.

Senator AYRES: So did the Prime Minister's announcement have any impact at all on the progress of what you're describing now as the post substantial settling of the terms?

Senator Birmingham: Not in terms of the content, no.

Senator AYRES: We didn't have to make any concessions in order to get the process moving again?

Senator Birmingham: No. There was no change to the content or substance of the agreement from the announcement of conclusion of negotiations in August 2018—is that right, Ms McCarthy?

Ms McCarthy : Yes.

Senator Birmingham: There has been no change in the substance or content of the agreement since then.

Ms McCarthy : Yes, Minister; that's right.

Senator AYRES: Since August 2018, so the timetable is: August 2018, negotiations substantially concluded?

Ms McCarthy : That's right. Prime Minister Morrison and President Widodo announced a substantive conclusion of the IA-CEPA negotiations on 31 August 2018.

Senator AYRES: And it was in October that the Prime Minister announced that the Australian government would consider moving its embassy in Israel after that announcement had been made with—

Ms McCarthy : I think that's my recollection.

Senator Birmingham: It certainly was after that. Whether it was October precisely—it probably was October, Senator Ayres.

Senator AYRES: Was it a strategic decision from our negotiation team to fail to include a clause to terminate the existing bilateral agreement? It encountered some criticism in the JSCOT process.

Ms McCarthy : That's true.

Senator AYRES: What was the rationale for that?

Ms McCarthy : We had negotiated a very good investment chapter in the Indonesia agreement. That included ISDS provisions, which have modern up-to-date safeguards. The bilateral investment treaty dates from 1993 and doesn't have those safeguards. It was a very complex and wide-ranging negotiation and, when you're getting to the end of those negotiations, you have to decide which issues you have to deal with now and which issues you can leave aside for future. And I think the decision in finalising that negotiation was that we really did need to finalise the market access package particularly. The rules had been developed, but the market access package was right up to the last moment. It was a very difficult and hard negotiation and it was considered that the bilateral investment treaty could be left until after that package had been concluded.

Senator AYRES: Was termination of the pre-existing bilateral agreement something that Australia had pursued during the negotiations?

Ms McCarthy : It was something that had been discussed between the parties, but it wasn't pursued, as I said.

Senator AYRES: But you understand my question: was it something that Australia pursued in the negotiations, or did we not press that at any point?

Ms McCarthy : We didn't really pursue it as such.

Senator AYRES: And why not?

Ms McCarthy : As I said, we were concentrating on getting a very good investment chapter agreed with Indonesia which included new ISDS provisions that have modern safeguards within them. I think the judgement was made that we didn't need to pursue termination of the bilateral investment treaty at that time and that that could be done at another time.

Senator AYRES: I'm struggling to work out what—if you look at it logically, in terms of the investment flows between the two countries, Australian investors have a bigger presence in Indonesia than Indonesian investors in Australia. I wonder whether that weighed on the negotiation team's considerations. Everybody would have known that the criticism about multiple investor provisions is not a new argument and is not an argument that's confined to particular parts of the trade debate, if I can put it that way. It's a pretty widely held view. In that environment, I don't understand why we wouldn't—it's not a complicated matter.

Senator Birmingham: It's an issue where, particularly since the shadow minister wrote to me a little while ago and since the JSCOT report that I've been reflecting on, and given the commitment that I've subsequently made, it would have been preferable if the termination of the bilateral investment treaty had been achievable as part of the overall negotiations. But I think Ms McCarthy makes a valid point. There are many things moving in negotiations and to be settled. Of course, these negotiations were concluded in circumstances where both nations were less than a year away from major elections being undertaken, so the pressure was on to try to get them concluded and get matters settled. It's not unusual in those circumstances that, if you don't meet that type of deadline, suddenly it takes another year or two to get there.

So, to your point, would it have been preferable? Yes. Did it not make that final cut? Well, obviously it did not. But the government has been clear and has now started the process of terminating that agreement.

Senator AYRES: Thank you for that. I do want to get on to the commitment. Would you be able to provide on notice—it may be something that is publicly available anyway—a list of all of the bilateral agreements that we're negotiating in 2018? I think it goes to your point that there are a number of moving pieces in the picture, complicated by the number of bilateral agreements that Australia's simultaneously engaged in negotiating. It will be interesting to know how many we were trying to manage at the one time.

Ms McCarthy : How many—

Senator AYRES: bilateral negotiations were we conducting for trade agreements?

Senator Birmingham: Bilateral free trade agreements are actually relatively in small number because they're quite resource intensive in and of themselves, and we certainly wouldn't limit that to bilateral, because one of the big tasks at present has been ASEP. We would for parts of the Indonesian negotiations have been concluding CPTPP or moving through the ratification stages of that. Those two plurilateral agreements are quite resource intensive. The Pacific Alliance, another multination agreement, is underway. Bilateral agreements are more limited to concluding Hong Kong, which was concluded subsequent to Indonesia; off course the EU; and Peru, which was concluded a little while before Indonesia but would have overlapped as well in that regard. The pressures of other agreements under negotiation are real in terms of the department's overall work profile, but the pressures equally exist just within a single agreement and negotiation too in terms of concluding.

Senator AYRES: On the commitment to terminate the survival clause from the 1992 agreement—I keep calling it the 1992 agreement.

Ms McCarthy : It was signed in 1992 and came into effect in 1993.

Senator AYRES: Thank you. What are the necessary steps and what's the process to terminate that provision?

Ms McCarthy : To terminate that treaty, it will have to be a treaty-level agreement between Indonesia and Australia. We would agree with Indonesia the text of an exchange of letters or a treaty-level exchange of letters terminating the bit and specifically the survival clause as well. That would need to be approved through the system here. Once that text is agreed between Australia and Indonesia, it would go to the executive council for approval for signature. Then the treaty would be signed and then it would be referred to JSCOT and would go through the normal treaty-making process.

Senator Birmingham: As a minor treaty action, I think, for the JSCOT's process of definition—

Senator AYRES: There's been some discussion about it. I don't think it will be a controversial treaty action.

Senator Birmingham: I thought not.

Senator AYRES: Since the minister gave the commitment to secure the passage of the legislation, what steps have been undertaken by DFAT with the Indonesian side?

Ms McCarthy : We have previously reached out to Indonesia to suggest that we discuss the termination of the BIT.

Senator AYRES: Sorry to interrupt. Was that prior to the commitment being made? I know there was some discussion about this—

Ms McCarthy : Yes, that's right.

Senator AYRES: following the JSCOT process.

Senator Birmingham: Cognisant of the fact that I was weighing the issues and the government was weighing the issues, it seemed prudent to authorise the department to start having those exploratory discussions with Indonesia.

Senator AYRES: Thank you. Sorry to interrupt, Ms McCarthy.

Ms McCarthy : Yes, as Minister Birmingham has said, we have reached out to Indonesia and we've had discussions with Indonesia about a text, and we have proposed a text to Indonesia, and we're still finalising that text.

Senator AYRES: How is all that going?

Ms McCarthy : It's going very well. Indonesia is clearly also of a mind that the BIT should be terminated. So we expect that to progress reasonably quickly.

Senator Birmingham: Subsequent to signing off on the letter on Monday morning to the shadow minister, I have signed off other procedural steps within government to formalise the process and get the ball rolling as well. We're not letting the grass grow under our feet on that one.

Senator AYRES: Again, in relation to the letter that Minister Birmingham wrote, how will the department secure agreement that article 12.9 of IA-CEPA will not be used to waive labour market testing in future?

Ms McCarthy : That is a very soft commitment. It indicates that if the parties agree—

Senator AYRES: When you say 'soft commitment'—

Ms McCarthy : Article 12.9 itself.

Senator Birmingham: The actual article 12.9.

Senator AYRES: I was hoping you weren't describing my commitment as soft! Otherwise, I'll have some very difficult discussions later on this evening.

Ms McCarthy : That's a very soft commitment that the parties may wish to enter into negotiations to discuss whether contractual service suppliers would be a commitment between Australia and Indonesia under IA-CEPA. In that context, both parties have to agree to do that, and so, if it's government policy not to do that, then of course the department will not be entering into those negotiations. We'll be saying to Indonesia, if it should ask, that we're not prepared to do that.

Senator AYRES: So that forms a parameter for the negotiations?

Ms McCarthy : That's right.

Senator Birmingham: Article 12.9 works very clearly—I was trying to find the exact words. 'By mutual agreement' is the simplest way to say it. Neither side can seek to extract anything through the exercise of article 12.9 without the concurrence of the other.

Senator AYRES: In short, there may be an agreement on contract for services, but it won't proceed without a labour market testing provision?

Senator Birmingham: The first threshold under article 12.9 actually is that there has an agreement to even review anything. So as a first-threshold test is whether we agree to even have a review after three years, and then, if we have that review, what it finds and how it's run, and then there's a further threshold of whether we agree, out of the review, to do anything. Obviously, the government have made it clear that we will not entertain, propose or bring forward anything that involves labour market testing waivers, and, were the review provision to be exercised and any changes recommended, we would bring those changes forward to JSCOT for consideration.

Senator AYRES: Could I just ask you some questions about working holiday visa holders. The letter gives a commitment to implement the recommendation to the Migrant Workers Taskforce, including bringing forward legislation—of course, those matters aren't within your portfolio; they're with Minister Porter. I assume you had engagement and discussion and agreement with Minister Porter on the implementation of the task force's recommendations prior to writing to Ms King. Is that correct?

Senator Birmingham: Minister Porter, Minister Coleman and I had discussions about all of those relevant matters.

Senator AYRES: I'm happy for you to take this on notice. Has Minister Porter given an indication to you of which recommendations require legislation and the time frame for drafting necessary legislation?

Senator Birmingham: We'll have to take that on notice. There is a discussion paper in relation to, particularly, penalty strengthening that is in the public arena at present, and it's anticipated that that will lead to legislation in that regard. But, in terms of the 22 recommendations, we will take question that on notice and seek a response from the other agencies.

Senator AYRES: Can I give you a couple of questions that you might take the same approach to?

Senator Birmingham: Sure.

Senator AYRES: Can you also come back to me about which of the task force recommendations can be implemented without the need for legislation, as well as the expected time frame of both legislation and the recommendations that don't require legislation?

Senator Birmingham: Sure. In other circumstances, I might say that you should put those on notice to Attorney-General's and Workplace Relations directly, but, in the spirit of goodwill on this issue, we'll happily take them on notice and process them through.

Senator AYRES: I appreciate that. There are other portfolios other than Industrial Relations that the recommendations fall under—Employment, Skills, Small and Family Business, for example. Have you had any engagement with any of those ministers?

Senator Birmingham: Office to office, there has been some engagement around the margins of some of the issues that were discussed. The direct discussions were obviously with the Attorney-General and the minister for immigration, because that's where the commitments particularly related. Of course, the commitments made ultimately have whole-of-government sign-off from the PM as well.

Senator AYRES: If you could come back to me with an outline of all of that, that would be helpful. There's a curious phrase in the letter. It talks about 'the worst forms of exploitation'. I don't want to put words in your mouth, but I assume that that really sits in the context of the kind of exploitation that's set out in the migrant workers report?

Senator Birmingham: That report obviously is a baseline, for want of a better word, in terms of the types of reforms that are being undertaken.

Senator AYRES: Will you be moving in the Senate to refer treaty-making processes to JSCOT? As I said, I'm new here. I assume it requires a similar resolution in the House of Representatives as well?

Senator Birmingham: I have to check on JSCOT. Certainly, House committees—

Senator AYRES: Sorry, one of the commitments is that—

Senator Birmingham: Yes. We will be fulfilling that commitment by whatever means are necessary. I was getting caught up in processes. With House committees, I can simply write to the chair, proposing that they adopt terms of reference from a minister. I'm actually not sure on JSCOT's status as a joint committee and whether it requires a chamber resolution. But we will resolve that, and, certainly, to pre-empt the remainder of that question, I'm happy to consult on the terms of reference on the way through.

Senator AYRES: Good. There have been previous questions, as I understand it—and it was certainly a feature of the JSCOT consideration of this and previous bilateral trade agreements—about economic modelling. That's correct, isn't it? It's a longstanding discussion? It's not just JSCOT that has maintained that position? It's also some of the industry bodies and industry stakeholders out there—not just the unions, but some of the business organisations as well?

Senator Birmingham: There has been a degree of debate over a period of time about the place of economic modelling—the value of it and the extent to which assumptions to drive economic modelling need to be heroic or otherwise, in terms of shaping it. The government obviously hasn't made any commitments in relation to economic modelling there. The reviews of the FTAs—and, in the case of IA-CEPA, it is a five-year review, so there is an opportunity there for a wholesale review of impact. Of course, during those processes, as during the ratification processes and the JSCOT processes, there is an opportunity for each and every industry sector to put their own pitch as to whether they think it is good, bad or otherwise in terms of its impact in their industry and therefore on their part of the economy.

Senator AYRES: I saw a Harvard report that came out a couple of weeks ago that said that Australia had slipped 23 down the rankings in terms of export complexity and we are on par with a series of developing—at best—countries, including Angola and a range of other places. To what extent might proper economic modelling help shape an effort by the department to focus on trade negotiations that push Australia up the value chain of our exports, instead of down?

Senator Birmingham: Officials might want to add there, but I certainly have had discussions with Mr Morton, Assistant Minister to the Prime Minister, who is leading the red tape reduction role in terms of the types of issues identified in that ranking. Those issues tend to go more to the regulatory burden of getting approvals to export the types of standards that have to be met, and I think there is certainly some work that we can try to do to streamline that. It requires some cooperation from the states and territories as well. I think they are important areas of red tape reduction, but they don't particularly go to the provisions of FTAs. I don't know if others wish to supplement information on that.

Senator AYRES: In the absence of that, has the government's position changed in terms of economic modelling?

Senator Birmingham: No. At present, the government is not persuaded that there is sufficient validity or robustness to the type of modelling that can be undertaken, but we do think extensive consultation in the ratification process is important, as I say, so that each and every industry sector, who may believe they will be impacted has the opportunity to make their case. Then, of course, everybody through that process—as internally in government we do through the National Interest Analysis—is able to look at the sum of those opinions.

Senator AYRES: I want to ask a couple of questions about the investor state dispute settlement procedures. I know I dealt with them a little bit earlier. Are all public health measures carved out from the scope of the ISDS—for example, those related to tobacco, the PBS, Medicare benefit scheme, Therapeutic Goods Administration and the Office of the gene Technology Regulator?

Ms McCarthy : Yes, they are.

Senator AYRES: There is no possibility of a Philip Morris-style application being made under this agreement?

Ms McCarthy : There is not.

Senator AYRES: Can decisions of the Foreign Investment Review Board be challenged under the ISDS provisions?

Ms McCarthy : No.

Senator AYRES: In the letter to Ms King, Senator Birmingham said the government would include an assessment of the ISDS mechanism and a review of IA-CEPA five years after its entry into force. What form will the assessment take and will the department consult widely? Finally, has the department alerted Indonesian officials of that assessment?

Ms McCarthy : There is a general five-year review of IA-CEPA so we will be doing that with Indonesia. Certainly, the investment chapter, including the ISDS provisions, will be part of that review. It is a general review across the whole agreement. So we would expect to consult widely on how IA-CEPA has been travelling in the Australian system. We would, obviously, as I said, consult widely on how people consider IA-CEPA is operating. The operation of the ISDS provisions would be part of that general review, and we would consult widely on those issues as well.

Senator AYRES: On the letter, the minister says that confirmation of the continuing operation of the licensing and registration safeguards and their enforcement were negotiated ahead of the passage of the ChAFTA agreement enabling legislation. Can I just put this in simple terms: does that mean that a tradesperson who comes here under the terms of the agreement—as a working holiday-maker, perhaps—is required to secure a licence or registration under the applicable Commonwealth or state law before they can work?

Senator Birmingham: In simple terms, yes. Somebody who's going to work as an electrician in any state or territory of Australia needs to be able to prove and demonstrate their skills and meet local licensing provisions, regardless of what visa or residency status they hold.

Senator AYRES: So whether the qualification for electricians in Indonesia is equivalent or not is irrelevant; they must acquire the Australian licence?

Ms McCarthy : They must meet the Australian licensing requirements, yes.

Senator AYRES: What's the oversight mechanism to ensure compliance with that?

Senator Birmingham: In that regard, it's the same as for any licensed tradesperson operating in a state or territory—whether it's making sure that an Australian doesn't pass off qualifications that don't meet the licensing requirements or somebody on a non-citizen visa that entitles them to work.

Senator AYRES: I have just—you'll be pleased to learn—one more set of questions. Can you come back to me on notice on the following questions on the Uruguay agreement that's coming to us. How many officers have been engaged in the negotiations? What is the breakdown of travel and travel costs, including accommodation costs, ancillary costs, staff costs and legal costs associated with negotiating that agreement?

Mr Mina : We can very much come back to you with the detail. I will, however, note that, in the case of the Uruguay round—

Senator AYRES: Uruguay round—

Senator Birmingham: I hope it didn't take that long to negotiate!

Mr Mina : It wasn't quite that long!

Senator AYRES: I reckon you'll be doing better than Rockpool and their wages books to go back that far in—

Mr Mina : In the case of the Uruguay investment treaty, there were two officers working very much as part of other duties that they had underway in our trade law branch. Much of that negotiation was able to be conducted remotely, and at least some of the negotiations were done through video conferencing. So part of the reason for that related to the individuals concerned, who had strong links. One of the officers involved was, in fact, our former ambassador to Uruguay. She ended up becoming the negotiator for this investment treaty reform project. So we were able to run efficiencies in that way. But should you wish for any further detail, we would be very happy to take that on notice.

Senator AYRES: I would like a breakdown, and I'll take into those things into account. I'm sure it's an important country to Australia. We do have a very small trade volume with Uruguay. I did wonder how many resources the department and the government have put into the negotiation of that agreement, but I'll—

Mr Mina : One of the reasons, of course, we started with Uruguay was the closeness of the relationship, but also the fact of the readiness of both sides to look at introducing these new modern procedural safeguards into the investment treaty. It was a bit of an innovation for us—as it was for the Uruguayan government—to go in that direction, and it's proven very successful.

Senator AYRES: Thank you. That's all I have.

CHAIR: That concludes the examination of the Department of Foreign Affairs and Trade. I thank the officers for their attendance.