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Monday, 9 November 2015
Page: 7914

Senator BACK (Western Australia) (12:11): I thank you for the opportunity to speak on the Customs Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015 and the Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015, in my capacity as the chair of the Foreign Affairs, Defence and Trade Legislation Committee.

Can I first acknowledge the cooperation of the opposition, through Senator Wong, who negotiated with the government the conditions upon which the opposition is now to support the China-Australia Free Trade Agreement legislation. Those areas of agreement are these. Firstly, in relation to labour, with a view that Australians should always have priority in the labour market, and that overseas workers should be recruited only in circumstances where suitably qualified local workers are not available. I endorse that. As a Western Australian we have of course seen that in projects like Roy Hill, the iron ore project development in the Pilbara region of Western Australia. The amendment that has been agreed will be the existing requirement under policy that employers seeking to sponsor skilled workers on 457 visas under work agreements will have to demonstrate that they have made recent and genuine efforts to recruit local Australian workers first, and I endorse that.

The second relates to amendments to guidelines, which are now agreed, for companies seeking a work agreement. These amendments will incorporate additional criteria for the minister to consider in approving work agreements. To ensure observance of those guidelines they will be referenced in a new regulation, and I support that.

The third relates to the Department of Immigration and Border Protection including in its annual report details about the number of work agreements signed, including the number of 457 visas engaged under the agreements, so that we have program transparency for the Australian community.

Fourth, with regard to subclass 457 visas for overseas tradespersons, the government will amend a visa condition to make it clear that visa holders must also obtain licences, registrations or memberships, as required under Commonwealth, state or territory law. Further, the visa holder will be obliged to notify the immigration department if their licence or their registration is refused, revoked, ceases or is cancelled. That should give a high degree of satisfaction to those who expressed so much concern in the negotiations leading up to this agreement. Finally, the Department of Immigration and Border Protection will continue to investigate the evidence-based allegations of noncompliance with visa conditions.

I would like to make the point in general terms that we are a trading nation. Continentally, we are the geographic landmass of the United States of America, with the exception of Alaska, and we have the population of greater New York—23 million people. We are not capable of locally and domestically consuming the products that we produce in my home state. My state colleague Senator Cormann is present, and his own family is very heavily involved in grain production. We export 95 per cent of the 16 million tonnes that we produce in our wheat crop every year. What hope does Australia have to consume 95 per cent? None. Again, if you take our home state of Western Australia with its iron ore production of about 300 million tonnes-plus a year—almost one million tonnes a day—we do not have the capacity in our country to be able to locally use that iron ore to turn it into steel for various construction and other purposes. The same would apply with other commodities such as coal from Queensland and New South Wales and others. Therefore, we are a trading nation, and we must trade with those countries who desire our products and with whom we can work in terms of our trade agreements.

I want to make this point strongly: trade with China is worth in excess of $100 billion a year—$2 billion a week. It is interesting that our exports—Australia's exports to China—are more than the combined value of our exports to the United States of America, Germany, the United Kingdom, South Korea, France, Canada and all of South-East Asia. That is the scale of Australia's trade with China. How tremendous it is that we are able to negotiate this trade agreement with this country. I will comment a little further in a few moments and refer to the statements of some of our trading partners about just how important this agreement is. China is our largest two-way trading partner in goods and services. When you add goods and services, imports and exports, that $100 billion a year goes up to $160 billion a year—for the last financial year. China is our largest destination and our largest source of merchandise imports—valued in excess of $50 billion. But we face increasing competition from countries like the United States and Canada, and the European Union, that are looking eastward into our very sector of the world. For how many years has Australia been that little country Down Under in the bottom right-hand corner of the world? And here we are today as front and centre in Asia. In my own state of Western Australia the time zone is within one hour east and west of something like 60 per cent of the world's economic activity now. This is the agreement that is going to open up that opportunity even more for us. It is imperative, of course, that we are able to proceed as we are.

If I may, I want to go to the comment of Jennifer Westacott from the Business Council of Australia. She made the point that so many of us are aware of: if we are not able to reach the agreement that I hope we are going to reach today, the failure to be able to ratify this agreement before the end of December and the failure to get the two levels of tariff reductions—one for 2015 and one for 2016—will mean that within days in early January agriculture alone will stand to lose more than $330 million. Further than that, Ms Westacott made the observation that, if we do not ratify the agreement, the cost in the financial services sector by 2030, in her estimate, will be A$4 billion and 10,000 jobs. At a time when the world is in a position of economic stalemate, there are opportunities for this country, and it is fantastic that the opposition have seen the value and the opportunity.

I want to refer to the comments of the chairman of Mitsui Australia, Yasushi Takahashi. As we know, Mitsui is an enormous local company with Japanese equity. It has $8 billion of annual sales here in Australia—iron ore, coal and LNG agriculture. This is the point that this leading Japanese businessman has made about the China-Australia Free Trade Agreement: that Australia has been offered, in his opinion, a unique competitive opportunity through the agreement that we must not miss. I quote from Takahashi in a speech from 18 September:

It is an important fact that China has not made agreements with any other countries that compete with Australia in beef or iron ore or raw materials and other things like that.

His quotation concludes:

Australia has been given a great opportunity to have a competitive advantage over other exporters to China, so I sincerely hope the Australian government and Australian parliament will not miss this great opportunity.

Isn't it interesting that that is the statement of a leading Japanese businessman about the opportunity that Australia has with a country with whom they see an enormous competition, and that is China.

I would like to address a couple of questions—one of them being the investor-state dispute settlement scheme. There seems to be great argument and concern about its impact here in Australia. I want to relate to you my experience doing business in the oil and gas industry in India, a country with whom we do not have a free trade agreement and no opportunity of investor-state dispute settlement. Of course, there is the circumstance in which you negotiate in good faith with your client. You sign contracts and you commence your work and the government of the day says, 'We're going to put on a two or three per cent cess'—they use that term, being a tax or a tariff on all business associated with overseas companies; in their case, on this occasion for the purpose of educational advancement—'not into the future but on all existing contracts.'

The point I want to make about ISDS is that it helps companies enormously that will be doing business in China or, respectively, in Japan or Korea. Without this there is limited scope for an Australian company to put itself up against the might, for example, of the Chinese state in a dispute situation. So I say to people who are so concerned about the provision of ISDS in these agreements that it is equally there for the protection of Australian businesses and the opportunities we will have into the future.

It is a fact that, when we started negotiating this China-Australia Free Trade Agreement 10 years ago, commodities were the area in which China and Australia saw the opportunities. Ten years later, in 2015, it is as much about services as it is about commodities. Why is that the case? China today sees itself in competition with the United States of America to become the greatest economy in the world, but they recognise they have deficiencies in their services sector—potential regulation, corporate governance, insurance, banking and ACCC type activities—and they have recognised, fortunately for us, that Australia actually has these skills in services, in aged care and in health and in architecture and in a range of areas that the Chinese need. They do not want to go to the United States to get that expertise because the United States is their competitor. We are not a competitor of China.

The scope, as mentioned by Ms Westacott, for provision of services to China is enormous. For those of us with children and eventually grandchildren who will be looking for future employment in the highly paid skilled areas, let us look no further than the capacity to be able to provide those services in China. One example alone is that today there are more than 1,100 architects engaged on projects in China—not all of them are in China; many of them are here in Australia—and we have not signed or ratified the free trade agreement yet. The Chinese recognise that we have high-value, high-paying skills that are useful to them. We have often heard the criticism: why can the Chinese come here and take equity in our assets and yet we cannot do the same in China? The free trade agreement changes that. An example is Ramsay in the aged-care sector. Under the terms of the new agreement, Ramsay could establish a chain of aged-care facilities in China—own the land, operate the facilities, put Australian staff in there, along with Chinese staff, and expatriate the profits back to Australia, if and as they so desire. The same applies to the health sector and the education sector. We already know that the largest number of overseas students in this country are Chinese. We know that 10 per cent of the Australian population has a Chinese language as their first language in their homes. We know the influence now and we are so uniquely positioned.

Let me also make an observation, if I can, surrounding the whole question of sovereignty. The parliament at all times is able to protect the sovereignty of this nation and the people in it under our Constitution. The question has been asked: do we limit our sovereignty? Is our sovereignty diluted as a result of signing an agreement such as this one? I say the answer is no, it does not. The parliament at any time can rescind any agreement with any country if the parliament believes that our sovereignty is at risk or is being or has been diluted. I also make an observation, if I may, about commentary regarding currency—the fact that China has a regulated currency and ours is a free-floating currency. The simple point is that this free trade agreement and any other free trade agreement that we are negotiating or have negotiated do not have currency provisions. Many countries peg their currencies, for example—wisely or unwisely, in the case of some South American countries—to the US dollar. It is a question for those countries, but nothing at all impacts on our competitiveness as a result of signing this free trade agreement.

Let me conclude, if I may, with the value of this and other agreements to this country. We now have signed free trade agreements with Korea and with Japan, and we will hopefully ratify this one. But there is another point that the community needs to be aware of and that is that the minister and his negotiating team have negotiated most favoured nation status between Australia and those countries. What does that mean? It simply means that if the Koreans, sometime in the future, participate in a free trade agreement with another country—let's say it is associated with a commodity that we also export into that country—we must enjoy at least those conditions: the best most favoured nation conditions. It is important that we realise that each of these free trade agreements—while they are ratified and signed by the parliament—is only the beginning of a new relationship. I will give you an example: our relationship with Japan, in which rice was not included to anywhere near the extent of other commodities. We know there are very high tariffs on the import of rice into Japan. Why do I make that observation? Because the average age of Japanese farmers is now 68. The size of their land titles is too small for economic production of rice. The title system for purchase and sale of agricultural land in Japan is so tight that it is now simply impossible, or very difficult, to produce agricultural land of a critical mass sufficient to be able to economically produce rice. Also, the younger members of the Japanese community are now mainly in cities and are not following their families into farming. Why is this important? It is because if Japan gets to the stage where they will no longer be self-sufficient in rice production—and they are getting very close to that now—they will look to Australia under the Japan-Australia free trade agreement and the most favoured nation status. They must, inevitably, look to us as being those who can produce and export rice of a price and quality that they want.

The point I want to leave the chamber with is that each of these agreements builds on the other. Each of these agreements is the starting point for an absolutely new wave of economic activity. In the case of the China-Australia Free Trade Agreement, this will be in services, in commodities and in future wealth—in growing the size of the cake. If we are going to see continued economic advancement, continued employment and continued investment into and from this country it is going to be because we continue to understand and remember that we are a trading nation—that we are a nation on a huge landmass blessed with plenty of commodities and blessed with a well-educated population of people but a very small population. We always know that the best way of avoiding soldiers coming over borders is to make sure trade and investment cross those borders.