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Tuesday, 10 November 2015
Page: 8209

Senator XENOPHON (South Australia) (20:44): Tonight I want to speak about the latest free trade deal done by the government and ask the question: why are we, as a nation, not asking the tough questions about these deals? In the past decade, Australia has signed more than 10 FTAs. In the past two years the current government has signed deals with Japan, South Korea and now China, with ChAFTA. ChAFTA was passed by the Senate last night and is expected to come into force before the end of the year.

As most people acknowledge, these deals create winners and losers. Often, they are only as good as the negotiators you have in your corner and the political will of the government involved. But the question we should be asking is: is this deal better for the nation as a whole? After more than 10 years, the evidence is mounting that Australia is not winning in its strategy of pursuing bilateral trade agreements and that the national interest is not always being served. Figures from the Australian Bureau of Statistics show that Australia actually loses ground with partner countries once these deals are done. A detailed analysis reveals that the pattern is clear: two-way trade becomes more volatile, and increases in imports from partner countries outstrip exports from Australia. For example, our agreement with Thailand was signed in 2005 when imports from that country were roughly $5 billion. As at June 2013 imports had grown to $15 billion. In comparison, in that time, exports from Australia to Thailand grew from about $3 billion to only $6 billion.

How does this happen? It happens because we put too much faith in trade deals and are, too often, taken for mugs. For example, shortly after the Thailand deal was signed that country implemented a non-tariff trade barrier that made the price of an Australian-made Ford Territory in Thailand well over $100,000—a $57,000 Ford Territory costs well over $100,000 and that was before the exchange rate deteriorated, so now the price differential would be even greater. It is a similar story for other partner countries. The Singapore deal was signed in 2003 and between then and 2013 imports from Singapore to Australia rose from $7 billion to $19 billion, outstripping exports from Australia, which rose from $4 billion to $10 billion. The Chile deal, which was signed from 2009, has seen imports from Chile go up from $900 million to $1.5 billion, while exports from Australia to Chile have remained stagnant at $500 million.

This year, adding to this evidence, were findings by Australian National University trade expert Shiro Armstrong, the co-director of the Australia-Japan Research Centre at the Crawford School of Public Policy. In an in-depth study of 10 years of the biggest of our trade deals, the US-Australia free trade agreement, Dr Armstrong concluded that the agreement did not increase trade between Australia and the US and actually reduced trade with the rest of the world by $53 billion, through what is known as 'trade diversion'. Dr Armstrong said:

Deals that are struck in haste for primarily political reasons carry risk of substantial economic damage.

This finding should not have come as a surprise. It backs up what the Productivity Commission has said, consistently, since 2010 about these deals—that there is little or no evidence that they are broadly in the national interest. The Productivity Commission reiterated its concerns that bilateral trade deals distort trade flows, diverting trade away from cheaper sources and towards the partner country, and makes trade with partner countries more complicated, expensive and onerous. The Productivity Commission also criticised the secrecy of FTA negotiations and called for 'rigorous assessments' of FTAs before they are signed by governments. On 24 June 2015 the Productivity Commission released its Trade & assistance review 2013-14, which stated:

The emerging and growing potential for trade preferences to impose net costs on the community presents a compelling case for the final text of an agreement to be rigorously analysed before signing.

As evidence at a July 2015 hearing of the Treaties Committee by a Department of Foreign Affairs and Trade official revealed, the government carries out no follow-up analysis to check our trade performance against the glowing predictions made beforehand.

Taken altogether, it is clear that bilateral preferential trade deals are not broadly in the national interest. That we keep on signing them reminds me of a definition of insanity said to be attributed to Albert Einstein. He is reported to have said that the definition of insanity is repeating the same thing over and over again and expecting to get a different outcome. This government's devotion to signing two-way trade pacts is bordering on madness. It comes from an almost fundamentalist devotion to a literalist interpretation of free trade. When we have the Productivity Commission—not known for protectionist credentials—expressing serious concerns we should listen to them. We have become known in the halls of international trade as a 'free trade Taliban'. It is an insult delivered while our backs are turned, by countries that see us for mugs. Time and again, we enter these free trade negotiations and, again and again, we stand on the high moral ground and trade away our sovereign rights to act in our own national interest.

In the face of this mounting evidence, the government has steamed ahead and signed three more FTAs in the past year. When the China-Australia Free Trade Agreement was announced amid great fanfare, here in Canberra back in June, it was hailed as the best deal yet. But it soon emerged that ChAFTA contained measures that, for the first time, would allow foreign workers to come into Australia to work in a huge range of roles without the need for labour-market testing. As a leading legal expert in temporary labour migration, Dr Joanna Howe of the University of Adelaide's law school has pointed out that these labour market testing provisions are 'not controversial' in other developed countries—like Britain, Canada, Ireland and Austria—to 'ensure that local workers have preferential access to jobs'. A stand-off between the government and the opposition stretched out for many weeks, ending with a deal that, I have to admit, strengthened the agreement on several points. But it didn't go far enough.

I am deeply concerned that, according to Dr Howe, there remain gaping holes through which Chinese firms can bring in guest workers under 457 visas for four years, or as installers and servicers for up to three months, without any labour-market testing required. I believe ChAFTA can and should be improved, under future governments, but, in the long run, this is just another chapter in Australia's history of signing free trade deals without due and proper consideration of the national interest.

The next chapter will, no doubt, be the Trans-Pacific Partnership, the TPP, the text for which was released recently, for the first time—amazingly, only after it was agreed by all the partner countries, after five years of secret negotiations. Like ChAFTA, it contains an investor-state dispute resolution clause, which will give overseas firms the ability to sue Australian governments for setting policies that damage their bottom lines

Intellectual property experts, academics and environmental groups have said the ISDS clause exposes Australian governments to billion-dollar battles in unaccountable international tribunals. It has been put to me that, if a government introduced poker machine legislation to protect consumers, an overseas poker machine manufacturer could end up suing that government for doing what was clearly in the public interest.

ISDSs are an attack on our sovereignty as a nation—a huge backward step that was never taken by the Howard government. Public health experts have warned the provisions for innovative biologic medicine are 'worryingly ambiguous and unclear', paving the way for more pressure from the US to keep affordable medicines off the market for up to eight years. They say the deal could make some drugs more expensive by making it possible for pharmaceutical giants to delay handing over clinical trial data to generic drug manufacturers. More broadly though, the TPP cannot be described as a free trade deal at all. As ABC News's business editor, Ian Verrender, explained in an opinion piece on The Drum:

The Trans-Pacific Partnership is more about protectionism than trade …

Driven by the United States, what measures were devoted to trade overwhelmingly were focused on exactly the opposite; extending monopoly powers of American corporations and maintaining tariffs and quotas for US farmers unable to compete in a free trade world.

The government should heed the mounting evidence that these deals run counter to the national interest. It should give the Productivity Commission a formal role in conducting, openly, a cost-benefit analysis of possible FTAs in advance of entering negotiations. It should open negotiations to more transparency and provide a role for the parliament in amending texts rather than being treated as a rubber stamp.

I also disagree with the government's position of using $25 million of taxpayers' funds to spruik the three North Asia FTAs, trying to convince the public it was in their interests. That is why I made a formal complaint to the Auditor-General. These are important issues that need to be debated in the public and national interest.