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Wednesday, 24 September 2014
Page: 10498

Mr CONROY (Charlton) (10:16): At the outset let me make it very clear that Labor supports the Korea-Australia Free Trade Agreement. This is an agreement that delivers significant benefits to certain sectors of the economy, and the previous speaker highlighted the main beneficiaries, which are in the agricultural sector. That is a good thing, but it should be noted that the agricultural sector employs 300,000 people in this country out of a workforce of over 11 million. We should be delivering benefits to the agricultural sector, and I am happy that KAFTA does that, but I am nervous about some of the other aspects of this agreement.

To be serious, this agreement was poorly negotiated, and Labor has highlighted serious reservations with the agreement. We have outlined changes that we would pursue both in opposition and in government. Nevertheless, we support the Korean free trade agreement and we support free trade in general. We are a party of free trade, and we are a party that pursue multilateral free trade as the best course of action. Bilateral free trade agreements are a poor second choice in most times. But we do support free trade, and let us have none of these absurd reductionist arguments that, because we express concerns about aspects of free trade agreements, we are suddenly not for free trade. That is certainly not true.

We look at the actual facts of these matters. If you look at the recent Productivity Commission review of bilateral preferential trade agreements—or FTAs, as they are more commonly known—the Productivity Commission had some very interesting conclusions that we should be all very cognisant of. They included their finding that the increase in national income from FTAs was likely to be modest—quite modest, in fact. They found that there was little evidence that businesses gained substantial commercial benefits from FTAs, and they also found that modelling and claims by governments when FTAs are announced tend to oversell the economic value of these agreements to Australia. The Productivity Commission also highlighted the few benefits and the very considerable risks that occur when FTAs cover intellectual property and investor-state dispute settlement clauses, which I will return to in more detail later.

There can be no greater example of an FTA claiming great benefits but delivering very little than the Thai FTA. This is an agreement that was trumpeted by the Howard government as delivering real gains not just for the agricultural sector but for certain parts of manufacturing, and most especially the automotive sector, where there was great hope that the Ford Motor Company could export a lot of the Ford Territory—which is an excellent vehicle, a large vehicle, termed a medium SUV—into the Thai market. There was a great fanfare when we heard the announcements about the tariff reductions and everything else that was associated with it.

What happened? Within weeks of the FTA being signed and being implemented and tariffs being reduced on both sides of the ledger, the Thai government introduced a new motor registration and excise scheme that penalised vehicles with large engines. They effectively penalised vehicles imported into their country with large engines. The classic example was the Ford Territory, so exports of the Ford Territory to Thailand were hit with a cricket bat, and that was a market that never really eventuated. This is an example of an FTA promising to deliver lots, but, when behind-border measures interfere with that, we see consequences that are quite negative. That is not an argument against FTAs, it is not even an argument against multilateral free trade agreements; it is just an observation that often these agreements are oversold in terms of their benefits and that what really matters is the change in behaviour both by government and companies when FTAs are implemented.

If I can turn to the details of the Korea-Australia FTA, the most worrying aspect of this free trade agreement is the provisions around investor-state dispute settlement clauses—ISDSs as they are referred to—which give rights to foreign corporations, rights which do not accrue to domestically based companies, to sue governments for actions or decisions they take that might impact on the commercial operations of those businesses. The classic example of that, going on right now, is: the Hong Kong arm of Philip Morris is suing the Australian government for our actions around plain packaging for tobacco products—a piece of health reform that is already making significant impacts on reducing tobacco consumption, will reduce cancer rates within this society and save the Commonwealth billions of dollars and tens of thousands of lives. This is a great health reform that is being challenged under an obscure ISDS clause of a free trade agreement.

This is particularly worrying because this impacts on the sovereignty of nations. This parliament, on behalf of the people of Australia, has the right to legislate in the best interests of Australians. ISDS clauses interfere with that and, most notably, they give rights to foreign corporations that do not accrue to Australian corporations, and that is a real concern.

One area where we will see this more and more is around environmental regulation. This bill, with some caveats that you could drive a truck through, gives rights for Korean mining corporations to sue state and federal governments that make decisions around mining approvals. The classic example of this potentially in the future is a coalmine called Wallarah 2 in the seat of Dobell to the south of me. This is a coalmine proposal that has stirred up quite contentious public discomfort. Before the last election, former Premier Barry O'Farrell and the disgraced resources minister Chris Hartcher made a promise that this mine would not go ahead. Subsequently, it is going through its consent process—and I am not commenting on the actual merits of the case, but by the Wallarah 2 coalmine proposal being owned by a Korean company that company now has a potential right to sue the New South Wales government if the New South Wales government decides not to approve that mine—a right that BHP does not have, a right that Rio Tinto does not have, a right that any other Australian based coal mining corporation does not have. That is a significant concern.

We have already seen these ISDS provisions exploited in other countries on environmental regulations. For example, there have been some notable cases in Canada as well. It is a real concern. These ISDS provisions do occur in other FTAs Australia has signed and we should not be including them. The sovereignty of this parliament should not be restricted by free trade agreements. I am proud to say that Labor has said that in government we would seek to renegotiate this aspect of the Korean FTA, to remove these objectionable provisions.

The second concerning aspect of the Korean FTA is around copyright and IP provisions. I want to refer in some detail to the excellent contribution by the member for Gellibrand, who is an IP lawyer and who sat on the treaties committee and made some very trenchant observations about the IP provisions of this treaty. He has stated that the IP section of this treaty is one of the most mendacious examples of policy laundering that we have seen in recent times. The consultation attachment of the national interest analysis of the KAFTA provides that, consistent with Australia's existing obligations in the Australia-US and Australia-Singapore FTAs, and to fully implement its obligations under KAFTA, the Copyright Act 1968 will require amendment in due course to provide a legal incentive for online service providers to cooperate with copyright owners in preventing infringement, due to the High Court's decision in Roadshow Films v iiNet, which found that ISPs are not liable for authorising the infringements of subscribers. This characterisation firstly is frankly wrong in law. The High Court's decision did not change anyone's legal rights or obligations. It merely confirmed the scope of the obligations which have been well understood by the industry.

The House should be under no illusions that the terms of the authorisation liability safe harbour provisions have not changed in law since the implementation of the US FTA. This was the finding of the member for Gellibrand, and I agree with him completely on this case. And to use a trade obligation in this case, a very peculiar interpretation of this FTA, to circumvent the democratic debate over the merits of a policy initiative around copyright protection, is bizarre and I think it is not a good public policy outcome.

And what is happening here is the Attorney-General's Department has decided, unilaterally, that there is a risk that Australia could be perceived as being noncompliant with its US FTA obligations. And as I understand it, this is without any correspondence or prompting from the United States government. It is apparently also being done without consideration for whether this view should be tested legally.

If the Abbott government wants to reform Australia's Copyright Act, it should make the argument for this change on its merits. It should not hide behind an FTA, or use an obscure interpretation in this FTA, to drive a change that is quite inconsistent with the legal advice of most legal practitioners in this area. I am very happy to say that Labor has stated its concerns about the intellectual property provisions of this agreement and we have made it very clear that we will determine our position on any changes to the Copyright Act when they are made public.

This is part of a broader problem with FTAs, which is when they intrude into areas of intellectual property. DFAT has confirmed that none of the economic modelling done to justify the Korean FTA, around the benefits of the agreement, even considered the impact of the IP provisions of the agreement. And this is a gaping hole in the economic modelling of this agreement. This is important because the Productivity Commission's review of FTAs that I quoted earlier, quote a study of IP provisions that found that the Australia US FTA agreement has cost Australia nearly $1 billion through copyright changes that hurt the Australian economy. The Productivity Commission also found that it tilted the balance towards IP supplier interests over consumers. This is a dramatic concern. This is a concern that has not seen in the light of day. We are very focused on the benefits to agriculture—as we should be, and there are significant benefits to agriculture in this FTA—but we need to balance that against copyright changes that have not been tested, have not been modelled, include a bizarre interpretation of recent High Court changes and include ISDS provisions that threaten our sovereignty.

The third concern that Labor has flagged around the FTA is around the removal of the requirement for labour market testing for migration by Korean nationals. Labor believes that the government should require employers to show there are skill shortages if they wish to utilise KAFTA provisions on the movement of people. The government has informed the parliament that these provisions will not result in a significant increase in the use of section 457 visas and Labor will hold the government to account on this undertaking. This is a significant concern if this FTA is being used as a backdoor to bring in section 457 visa workers without genuine labour market testing. Labor is not opposed to the use of section 457 visas when it can be shown that Australians are not available to do the jobs that they are bringing in those workers for.

The fourth concern is around the provisions around the reduction in automotive tariffs. Unfortunately, this is a case of well and truly closing the barn door after the horse has bolted. It is well known that debates around the auto tariff provisions and ISDS were the two reasons why this agreement was not signed by Labor in government. Quite frankly, this government has removed one of those concerns by destroying the automotive industry. Within four months of coming into power, they have forced Holden and Toyota to leave this country by their $1½ billion cuts to the Automotive Transformation Scheme, and so they have removed the concerns around reductions in automotive tariffs. That is a real tragedy, because what we are seeing are 50,000 direct jobs going and another 200,000 indirect jobs going. Let us just put that in context: there are 300,000 workers in the agricultural sector and significant shares of that industry will benefit from this FTA, and that is a good thing. But we need to contrast that with this government destroying an industry that directly employees 50,000 workers and another 200,000 workers in the supply chain.

So this is an FTA that Labor has decided, on the broad merits of it, is justified, but we flag our significant concerns with it in the areas of ISDS, intellectual property, labour mobility and the treatment of the automotive sector.

I would also like to flag that I have significant concerns with how we are negotiating the Australia-China Free Trade Agreement. First off, I think it was a massive mistake by the Prime Minister to set an artificial negotiating deadline of the visit by the Chinese leadership to this country for the G20. I was in China on a delegation last month, and the Chinese were not hiding the fact that they regarded this date as a great opportunity to place pressure on Australia to accept a substandard agreement. I am voicing my concerns in advance to see what this government can deliver on the China FTA, but if that Korean FTA is any example I hold out few hopes, and I fear that we will be getting another substandard agreement. Nevertheless, Labor will support this agreement with the reservations that I have highlighted, and I thank you for the opportunity to speak.