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Joint Standing Committee on Foreign Affairs, Defence and Trade
26/08/2021
Expanding membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership

CLARK, Mr Bryan, Director, International Chamber of Commerce Australia, Australian Chamber of Commerce and Industry [by video link]

KING, Mr Demus, General Manager, Trade, Investment and Investor Relations, Minerals Council of Australia [by video link]

MARRIS, Mr Sid, Deputy Chief Executive Officer, Strategy, State and Territory Relationships, Minerals Council of Australia [by video link]

SALARDINI, Mr Ash, Chief Economist and General Manager Trade, National Farmers Federation [by video link]

THEOPHANOUS, Mr Harry, Manager, Workplace Relations, Trade and Investment, Minerals Council of Australia [by video link]

Subcommittee met at 09:51

CHAIR ( Mr Ted O'Brien ): I declare open this public hearing of the Trade Subcommittee of the Joint Committee on Foreign Affairs, Defence and Trade. This is a public hearing for the subcommittee's inquiry into expanding the membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or the CPTPP. These are public proceedings, although the subcommittee may agree to a request to have evidence heard in camera or may determine that certain evidence should be heard in camera. I remind witnesses that, in giving evidence to the subcommittee, they're protected in Australia by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness in Australia on account of evidence given to a committee, and such action may be treated by either house of parliament as a contempt. It is also a contempt to give false or misleading evidence to a committee. Those present here today are advised that filming and recording are permitted during the hearing. This hearing will be broadcast on the parliament's website, and the proof and official transcripts of proceedings will be published on the parliament's website.

I am now very happy to welcome representatives of the Minerals Council of Australia, the Australian Chamber of Commerce and Industry, and the National Farmers Federation. Thank you for your respective submissions. I invite you to make some opening statements, and, once we hear from all three groups, we'll dive straight into an open discussion. Let's start with the Minerals Council of Australia.

Mr Marris : Thank you, Chair. I start by acknowledging the traditional owners on the lands that all of us meet. In the case of myself and my colleagues, we're on the land of the traditional custodians of the Ngunawal and Ngambri lands, and we pay our respects to their elders past and present.

We see no downside in encouraging economies to apply to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. I'll call it 'partnership' all the way through. I don't really like acronyms. We see no downside in new applications, as the United Kingdom has done. The MCA has long advocated for free trade and expansion and diversification through trade and investment agreements. The importance of bilateral and multilateral trade agreements is particularly clear during times of geopolitical instability and change, when the rules based order that has underpinned global economic growth for decades is under stress.

We know that the Australian resources sector delivered a record $299 billion in export earnings in 2019-20—two thirds of Australia's export revenue. This success has been supported by the creation of norms of international agreements that have gradually expanded the world's trade and investment architecture and provided a stable rules based international order.

The partnership is an example of a high-quality multilateral trade agreement that Australia, together with Japan and other nations, was intimately involved in crafting and adapting. There are three points I'd make about the agreement. The first is that it's delivering significant economic benefits in participating economies, and it will deliver even more if other economies are included. We've cited in our submission recent modelling that we commissioned, which shows sustained real income gains of $15 billion by 2030 and export growth of $29 billion. Under an expanded partnership, these benefits would more than double.

Secondly, the agreement contains comprehensive modern rules that cover areas from environmental regulation to intellectual property to investment and rules of origin. The rules help to stimulate reforms in emerging economies that improve business environments and promote consistency. [Inaudible] Vietnam, which is becoming an increasingly important trade partner for Australia. Finally, the partnership dovetails with the Australian government's policy of boosting diversification, deepening trade and investment relationships and building the secure supply chains for minerals that will be central to tackling the challenges of climate change and delivering future economic growth and wellbeing.

I'll finish by broadening on the point about diversification. Broadening our customer base will improve the security of demand for Australia's industries, just as security of supply is vital for countries with which Australia trades. Australia has always sought a range of diverse markets to sell to. A competitive spirit has helped drive the success of Australian mining. For example, when iron ore is excluded from our trading profile, China only represents 15 per cent of Australia's resource exports. Australian miners have diverse supply lines and a diverse range of customers.

Our nation also explores for a wide range of commodities, including metals and minerals which are propelling global decarbonisation. The development of trade requires a deep and broad understanding by governments of industry and economic policies which can guide and support opportunities in trade, investment and cooperation. We've identified a number of economies in our submission where we see opportunities emerging for mining trade and investment—longstanding partners in the Asia-Pacific, Europe, the UK, North America and the emerging economic might of ASEAN and Asia more broadly. We look forward to exploring these more.

CHAIR: Thank you very much, Mr Marris. Mr King, do you want to add anything there, or was that on behalf of both of you?

Mr King : It was for both of us.

CHAIR: Thank you. Mr Clark?

Mr Clark : The CPTPP is an important regional agreement which is [inaudible]. However, within our region, CPTPP members are also members of other agreements, including the recently concluded Regional Comprehensive Economic Partnership, along with a number of older, regional and bilateral agreements. CPTPP includes Canada and Mexico, along with some other key trading partners in Asia, but it doesn't currently cover other important markets in our region like RCEP.

RCEP is the world's largest trade agreement and is arguably of greater significance than the CPTPP, though a range of countries are party to both. Almost a third of the world's population and 30 per cent of global GDP is covered by RCEP, not to mention that it's the only agreement that currently brings together China, Japan and South Korea.

While the Australian Chamber of Commerce and Industry acknowledges the benefits that can flow from bilateral and regional trade agreements to certain sectors, we regularly point out the build-up of red tape, resulting in the compounding development of bilateral and regional preferential trading agreements and their compliance regimes. As the number of preferential trade agreements available to Australian exporters grows, so does the confusion and inconsistency with the overlapping agreements. The noodle bowl continues to grow, and this can be seen as a significant barrier to trade for Australian SMEs. While there are benefits to having bilateral and multilateral preferential trade agreements in place, ensuring that there is a consistent approach across all of the agreements is important.

The Australian Chamber of Commerce and Industry has previously expressed concerns about the lack of harmonisation of the disparate agreements. The noodle bowl deepens and so too does the complexity of harmonisation. The potential for RCEP and CPTPP to be joined, and so realise the APEC goal of a free trade area in the Asia-Pacific, should be embraced and championed by Australia.

A number of nations, including Taiwan, China and Indonesia, have expressed interest in joining CPTPP. Yet, so far, only the UK appears to have actually entered into the formal process of accession for consideration. I look forward to discussing our submission with the inquiry today.

CHAIR: Thank you very much, Mr Clark. We'll go to Mr Salardini from the National Farmers Federation.

Mr Salardini : I'd like to thank the committee for the opportunity to speak on this important matter. The National Farmers Federation represents farmers and 75 per cent of farm-gate output that's exported. Thus, the fate of Australian agriculture is very much intertwined with the state of a liberalised global trading system.

The CPTPP has been instrumental in providing substantive improvements in market access and tariff reductions, and it has provided a forum to address and reduce non-tariff barriers. It has already provided tangible benefits for agriculture, including market access for Australian barley to Mexico, as well as opportunities in the $1-billion-plus Mexican red meat market. It has provided improved access for red meat and dairy into Japan. As such, NFF is fully supportive of the CPTPP, including its potential expansion. I'll quickly highlight some of the opportunities country-by-country.

Korea provides a significant opportunity despite Australia already having a free trade agreement with that country. The FTA has no built-in review mechanism, and some of the agreed tariff reductions, particularly with respect to beef, have been superseded by other FTAs, most notably with the USA—one of our major competitors. As an example, safeguard tariffs are applied to out-of-quota Australian beef, and this puts Australian producers at a 14 per cent tariff disadvantage compared to American producers. The CPTPP may provide an opportunity to review the terms of some of these tariff reductions.

In contrast, Taiwan is one of the few remaining major markets where Australia does not have an FTA. There are significant opportunities in red meat, pork, dairy and horticulture that we have not fully utilised. The complication is that many of our competitors, including New Zealand and the USA, have struck or are about to strike FTAs with Taiwan. This has provided them with favourable access and tariff reductions that make us uncompetitive.

As mentioned, the United Kingdom is another opportunity. They've already sought to join the CPTPP, and they have demonstrated a commitment to free and open trade in negotiations with Australia via the Australia-UK FTA. So it's incumbent upon Australia to work with the UK and UK farmers to progress their application to the CPTPP. It also provides Australia with another opportunity to embed and expand on negotiated outcomes in the proposed UK FTA.

There are problematic expansions, particularly the United States. Regardless of our competitive nature with the United States, the USA is still a large market for Australian agriculture with nearly $5 billion exported annually. However, the significant domestic support provided to US farmers is at odds with the spirit of the CPTPP. Australian farmers are not particularly happy about competing on the world stage when the odds are stacked against them. An example of this is the US farm bill, which provides $28 billion of domestic support for farmers, some $10 billion above the allowable WTO limits. This is not in keeping with the higher standards of the CPTPP, and, if there is an application by the United States, there needs to be a pathway around domestic supports for that country. With that, I'd like to thank the committee for the opportunity to speak today.

CHAIR: Thank you very much. I believe we've had opening statements from each organisation. I will start with questions for the Minerals Council of Australia. Firstly, you mentioned that you have undertaken, or you at least commissioned, some modelling, and thank you for referencing that. Is it possible for the committee to have further access to that modelling?

Mr King : Certainly. We can provide you with the full report of that modelling. That was produced by Petri and Plummer in 2018, I believe. We'll send that across afterwards.

CHAIR: Thank you. I notice where you've referenced it you spoke about five economies that were modelled, and I think you pointed out that Taiwan seemed to have the largest potential increase in exports. I wonder if you can expand on the opportunities in Taiwan from a numbers point of view, from the size of the market. You used language which I found interesting about them being 'competent to enter'. I wonder if you could also expand on the nature of that comment about Taiwan being an economy that's competent to enter. Over to you.

Mr King : Thank you, Senator. I will ask Harry Theophanous to open with some comments around that modelling specifically.

Mr Theophanous : Hello, Chair. Sorry, I've had some connection issues.

CHAIR: We can hear you now. Please proceed.

Mr Theophanous : The modelling modelled the TPP-11 scenario, which is what currently exists, then it modelled the TPP-16 scenario. It provided outputs for each of those scenarios. For clarity, the modelling is September 2018, so it begins in September 2018. That's before the agreement was entered into, before the agreement commenced. Following that, the modelling shows, basically, a difference in outcomes, in outputs, which has been included in the table in our submission, where Taiwan is one of the key markets where there's an expanded economic output for mining in Australia. And I note that Bloomfield, one of our members, has also made a submission, highlighting the positive outcomes for their company as well.

CHAIR: Two questions, if I may, on that. Does the Minerals Council see any reason why those estimates—at least the story being told of the comparison of those five potential economies—would have changed since this was done three years ago? Secondly, can you just confirm the scope of products and services that were assumed when doing that modelling?

Mr Marris : We would say that, from looking at the trade and growth figures, there's no reason why these modelling predictions are not correct. They operate on two levels. One is the bulk commodities and the commodities that are essential for industrialisation and urbanisation. It's a trend that we've seen across Asia for the last 20 years. That's going to continue across many economies. An economy like Taiwan, which is already well established and has a well-established industrial and urbanised base, still requires coal, iron ore, natural gas and copper. But, as one of the leading high-level manufacturers in the Asian region, increasingly the opportunities for the other materials we alluded to before—those that go into modern electronics and new technologies around decarbonisation and critical minerals—will actually be increased with the growing sophistication of the industrial base, whether that's Taiwan or Vietnam or other countries. As I say, there are two elements: the traditional bulk commodities that are essential for urbanisation and industrialisation, it would seem, but also increasingly the sophisticated metals and minerals that go into high-end products.

Mr King : We are looking at updating that modelling and we are happy to provide the committee with that updated modelling when it does come to completion. I think the importance of understanding the multiplier effect in the region of a multilateral agreement such as CPTPP is that, while we provide the raw materials to countries within the CPTPP membership, they will trade amongst themselves in various elements of those materials at various stages of finish. So you do get a significant multiplier effect. Particularly with Taiwan being a country that then exports the finished product across the region and the world, you will see a greater benefit associated with Taiwan participating in a multilateral agreement such as the CPTPP.

CHAIR: Thank you. So it then goes to the language you used, which I found interesting. I think you were saying that Taiwan, as an economy, would be 'competent to enter regional trade agreements such as CPTPP'. From what you've already outlined, your modelling points to, let's say, the size of the prize. While it's yet to be refreshed for the period of time since it was done to now, if I hear you correctly, you're saying that, if anything, demand might in fact have increased. It probably tells a similar story. Can you go to this issue of going 'competent to enter' and just explain what that means?

Mr King : Competent to enter in a number of contexts—not as much referring to geopolitical competency but more in relation to the way that it frames trade policies and domestic trade policies. That it is in a position where it could effectively participate in a trade agreement that is shaped in the way that the CPTPP is—for example, its labour laws and other laws would fit neatly within the framework by the FTA.

CHAIR: Can I keep on the same topic and go to the National Farmers Federation, noting that in your submission you called out beyond the encouragement of accession of the UK. You called out both South Korea and Taiwan, recommending the Australian government encourages or facilitates their accession. Just on Taiwan, and then feel free to expand into South Korea: is there anything you wish to add to the conversation we've just had?

Mr Salardini : In terms of Taiwan, it's a relatively big market. It's one of the few markets that, from an agricultural perspective, we don't have an FTA with. It's one that other competing nations, most notably New Zealand and potentially soon the USA, have an FTA with. It's a sizeable market. Currently, we don't do a lot of trade with Taiwan from an agricultural perspective. I think red meat is around $250 million and dairy is $100 million, but that's in the single digits in terms of the total size of that market. We are a small player at that moment in a market that could be quite big. If we are five or 10 per cent of that market, there's a potential market of $3 billion to $5 billion there to compete in. Taiwan could become a very important market from a pure numbers perspective. The other very interesting part about the Taiwan story is that it has a burgeoning middle class. It's one of those markets that provides the opportunity to sell high-value, quality produce and products—for example, just-in-time fruit and vegetables—onto supermarket shelves that demand a premium. That is another story that's very important, because agriculture needs to start to move into some of those premium markets where we can increase that margin, increase the value add and make our inputs go further, basically. That's the Taiwan story.

CHAIR: Before you go on, just to clarify: is it purely a price-point issue—that some of our competitors, like New Zealand, for example, have a bilateral FTA with Taiwan—where we find it hard to compete, or is it potentially through non-tariff benefits through their accession?

Mr Salardini : It would be a combination thereof, but I think the tariff is very visible to see that there is a differential. The USA, for example, are already starting to see negotiations progress around some tariffs from the commodity perspective, which puts us at a disadvantage. I think there are some very specific non-tariff barriers—for example, with pork. I'm not a MRL expert, but something around zero beta-agonist indications in pork. There are some non-tariff barriers there as well to be negotiated to open that market.

CHAIR: I think I interrupted you. You're going to South Korea?

Mr Salardini : I will quickly go to the UK and then to South Korea. The UK has demonstrated its willingness to commit to free and open trade, as evidenced by the negotiations in the proposed Australia-UK FTA. I think a part of that commitment from them is for us to reciprocate the commitment and help them accede to the CPTPP. But there is also an opportunity there to either embed or further negotiate on tariff and/or non-tariff barriers or quotas coming from the FDA. We get another chance to have those negotiations. We really do want to reciprocate the commitment that the UK has shown in the CPTPP context and help them on that journey as well.

The final one is South Korea. The main point there is around that, even in areas where we do have free trade agreements, there are benefits to multilateral agreements. One is the fact that we don't have a review mechanism in the Korea FTA. Since we negotiated those tariff reductions with the Koreans, there have been other FTAs that have overtaken us—for example, there's a 14 per cent differential between the out-of-quota tariff that we get charged versus what an American producer gets charged for beef. It's just a very simple point that, even with a country that we have an FTA with, there are benefits from a multilateral agreement.

CHAIR: Thank you. Before I move on to my colleagues: the Australian Chamber of Commerce and Industry, while you may not have made commentary in your submission about Taiwan and South Korea so much, do you wish to add any comments at this point?

Mr Clark : Not specifically. But, in relation to Taiwan, it's certainly an interesting market and has been one of Australia's major trading partners for a very long time. There appears though to be a geopolitical block to how we deal with Taiwan, which until recently at least has respected some of the Chinese [inaudible] Taiwan and our capacity to do that. Including Taiwan into the CPTPP or, in fact, anything else—we would support trying to encourage them to be part of what we see as the advanced world in a trading sense.

CHAIR: Thank you.

Senator SHELDON: Thanks for joining us all. In a number of the reports you're saying collectively we should include China in the CPTPP. How would you view their willingness to follow the trading rules and market access commitments to secure membership? Sid, I will go to you first.

Mr Marris : We don't offer a commentary on geopolitical or diplomatic relations between Australia and China. Overall, there has been a significant effort by China to appreciate and [inaudible] the World Trade Organization rules since its accession 10 years ago. From their own submission to this committee, there is a demonstrated willingness to follow those rules. Ultimately, of course, the test is in the behaviour, but one of the advantages of agreements is that it does create a reputational issue for all participants to live up to what they say. We think broadly that countries and economies should be taken on face value of their commitment, and they will be held accountable to those. Trade with China has been disrupted but is still continuing in some areas. From our perspective, we will concentrate on those elements of trade and building a relationship between businesses here and businesses in China, and leave it to governments to deal with those other issues.

Senator SHELDON: If I could go to Mr Clark: the same question, but are the trading rules and market access conditions to secure membership critically—how much confidence do you have that that will occur with China?

Mr Clark : I think it's a very interesting proposition. China publicly expressed interest in joining the CPTPP. The original TPP, of course, was designed to allow the United States to have a fairly prominent role. It will be terribly interesting if China becomes a CPTPP member before the United States, and where that might place the United States. You also have to remember that Australia is trying to ratify through our parliament and a number of other nations the accession and entry into force of the RCEP agreement, which also includes China. Of course, we also have our own bilateral with them as well, which is possibly being a bit tested at the moment. One of the fundamental things around the accession process is that it's not up to Australia. Australia is part of a team and there are many others who do this. The whole process of accession doesn't appear to be terribly clear, despite there being a formulaic process which can be followed on the formal website for the agreement, hosted by New Zealand. So we're curious around what is stopping other nations from approaching [inaudible] the UK has with [inaudible] formal agreement, be it Taiwan or China or anyone else. I think there are a number of steps that need to be sorted out, and the process for accession needs to be very clear and understood so that the members collectively express a view of which nations they find appealing to join and which they don't. What if the application comes from, right now, a nation like Iran, for example? I think there's some serious thinking to be done around this so that we get it right.

Senator SHELDON: Mr Salardini, I just want to highlight the trading rules and market access commitments to secure membership and ask whether you have confidence that China will stick by its commitments in light of what's been occurring for a number of months now with China and trade.

Mr Salardini : Much like my colleagues, I won't stray into the geopolitics and will stick to trade. But one of the things that China have demonstrated is that they have a vested interest in the rules based system. Regardless of what we see now, they do have an interest in it. I'm not going to say how confident I am or not, but, for example, how seriously they take the WTO and WTO dispute processes demonstrates that they do have a vested interest and abide by the rules based system.

I will come back to a few issues that were raised by our colleagues from ACCI. One of the few areas where we might be a little bit different from ACCI is that we believe that having different multilateral agreements is somewhat of a benefit. If there are issues with accession to the CPTPP, the Chinese are already part of the RCEP, as an example, and, when you expand that out to other countries and other jurisdictions that we might want to open up bilateral or multilateral trade agreements and economic relations with, this becomes very important. For example, India is very unlikely, in the near, medium or even probably long term, for political and domestic reasons, to sign up to a CPTPP. It is much more likely to sign up to an RCEP. I understand the complexities of having bilaterals and different multilaterals, but there are also some benefits to having basically different horses for different courses.

Senator SHELDON: Mr Marris, I want to go to the question about the effectiveness of dispute resolutions with China, for example, and whether there is a better or fairer way of us dealing with disputes, whether there is another, more rigorous way of actually trying to ensure that we don't have the same sorts of issues that we've had over many months now.

Mr Marris : The investor-state dispute resolution is slightly different to what might be considered a decision by a government to unilaterally change trading relationships. The ISDS provisions have evolved over time. There is no doubt about that. We generally see them as good in the form that they are because they do provide a level of protection in the normal commercial sphere for Australian investments into the region, and regional investments into Australia, which for mining is extremely important. So it builds confidence. Whether you can build a system that absolutely guarantees against a country making a unilateral decision—I don't think you can do that. I don't think that is possible, but, in terms of having a device that raises confidence, it is very important. The investment story is the other half of the equation that we haven't talked a lot about in this proceedings. In 2018, the Reserve Bank said that Australian mining needed $100 billion of investment just to keep existing capital stock going—the existing mines that we have operating. That's a large investment requirement in a world where investment is always tight. Building up confidence through agreements like this is vital to ensure that investment comes in and that jobs are sustained and can indeed grow.

Senator SHELDON: Thank you for that. Mr Salardini, is there anything that you'd like to add to that? Next I'll come to you, Mr Clark.

Mr Salardini : Thank you, Senator. I'm potentially in agreement with the Minerals Council. Their agricultural sector has a general shortfall, or gap, of capital of around $5 billion to $10 billion, and foreign investment is part of the story. If that mechanism does create more certainty in investors, that's a benefit, because we do have that shortfall, and, also, people will attach risk premiums where they feel that the risk is adequately addressed. It's not our main concern, but I can see the benefits of it if it does facilitate certainty in investments for foreign investors in agriculture.

Senator SHELDON: Thank you. Mr Clark, do you want to add anything?

Mr Clark : In terms of the dispute processes, we have no issues with the dispute processes being embedded inside our range of trade agreements, which includes having ISDS, and sometimes does not. We're open to where that goes, but we're also very alive to the issues inside the WTO dispute mechanism. Where do we go when the WTO mechanism is failing, as it currently is? There are a few options. We have some disputes with some of our trading partners. They're being heard and we hope will be resolved. I think that we have a good suite of dispute mechanisms available to us. On the investment front, I agree Australia is a recipient of foreign investment, and we need to set the rules that make sure that Australian industry is getting what it needs. That's done unilaterally, much more so than it is inside trade agreements. Again, we encourage Australia to take the fullest advantage of whatever we can around attracting foreign investment without it necessarily being tied to our trade agreements, although they can assist as well.

Senator SHELDON: Thanks, Mr Clark. I want to ask a follow-up question on China, and to you first. Do you believe any request by China to join the CPTPP should be considered on strength of its offer for more market access, with a commitment to transparency, an even playing field and compliance for businesses competing against state-owned enterprises?

Mr Clark : More generically, accession doesn't seem very clear. We assume that nations have to buy it off the shelf the way that it is. It should be a take-it-or-leave-it deal. Beyond that, you have nations who have to deal with their own particular market access schedules. If China were to come in, you would certainly not want anything less than the current agreements, and you would probably seek more, but, if they match what's there, then what would be the reason for rejecting or not supporting an extension? There are some threshold questions that need to be considered by the existing members around the terms we actually meet. As I indicated, there is a form sheet that's available to countries seeking accession. If they meet that and then, through the stated committee process, the membership are happy for them to come in, then, of course, bring them in.

Senator SHELDON: Thanks for that. Mr Salardini, there's the question of China coming to join the CPTPP and the important issue about market access to include a commitment around transparency, and obviously there's tension about transparency at this point. What views do you have on that?

Mr Salardini : I would mirror what Mr Clark said. He said it quite eloquently. Another benefit to a country like China perhaps joining the CPTPP is that we would get another chance to look at the market access issue and it would create other forums to have government-to-government dialogue as well. Even in the current situation, that could only be a good thing.

Senator SHELDON: I might finish off my line of questioning with you, Mr Marris. Do you want to add anything to the previous comments?

Mr Marris : I agree with Mr Salardini's comments about the opportunity for dialogue, which is important. We still have a free trade agreement with China. Yes, there are tensions at the moment, but we remain confident, certainly from a business-to-business point of view, that the trading relationship can be sustained and improved over time.

The other thing to bear in mind is that it's probably not only about us. For China to gain accession would mean that their relationship with the other members, particularly in the Asian region, would require the transparency that you've outlined. For Australia, that's important because the supply chains that operate across Asia mean that, increasingly, we might be supplying to a producer in Vietnam who then provides a finished product into China. It's about the grouping, as a whole, rather than just about us.

Senator SHELDON: Thanks very much for that.

CHAIR: Let's go to Mr Pasin.

Mr PASIN: Apologies to the Minerals Council and ACCI, but, predictably, my questions are for Mr Salardini. Firstly, I think you were clarifying this, but the audio wasn't perfect. I want to make sure that we've got it exactly. Given the bilateral agreement that is currently being finalised between the UK and Australia, what tangible benefits do you see for Australian agricultural exporters with the UK joining the CPTPP?

Mr Salardini : I think one of the issues is that, first of all, the UK FTA has not been fully signed off and embedded. We have an in-principle agreement. The second one is that I think the CPTPP gives another opportunity to revisit and renegotiate issues of market access, tariffs, quotas and non-tariff barriers. There's always a benefit in revisiting. The example I'd give is Korea. We have an FTA with Korea, and since that FTA and the negotiation, the tariffs that Korea now apply to our main competitors, including the USA, are much lower than the ones they apply to us. That's the benefit of supporting the UK accession to the CPTPP, from an agricultural perspective.

Mr PASIN: There are just a couple more from me. Moving away from the UK and to the US, it's clear that the Biden administration is showing a renewed interest in joining the CPTPP. What risks does the NFF perceive for Australian food producers and manufacturers in terms of the ability of the Americans to penetrate our market share in Asian markets?

Mr Salardini : That's a very good question. Australian farmers welcome competition. In the end, we can't pick and choose; we either support free trade or we don't. I think the question is whether, at the moment, the United States has a truly free-market approach in their agricultural sector. I'll go back to the farm bill that provides $28 billion of subsidies to American farmers and the fact that that's $10 billion above the allowable limit for supports. So, yes, there is a concern with that support, which could start eating into our market share. If they were eating into our market share and those supports weren't in place, we would just have to cop that. In the end, you lose some battles and you win some battles. But, overall, Australian agriculture is very competitive, and we'd always welcome them to play in an open market, on a fair, level playing field.

Mr PASIN: In light of that very real risk, has the NFF turned its mind to what Australian negotiators can do to ensure American beef, grain and wine producers remain on a level playing field should the US join the CPTPP?

Mr Salardini : Again, that's a very good question. Yes. I think they need to demonstrate a pathway for reducing those domestic supports, particularly because, at a broader, WTO level, agricultural reforms on domestic support have stalled. That would demonstrate a commitment to the spirit of free trade, and that would be the threshold issue for us. Again, America is a large market for us—$5 billion is exported to the United States—so we would very much welcome having access and competing with American counterparts, if that was a free, fair and competitive battle.

Mr PASIN: So is there any prospect that the carrot of entering the CPTPP could encourage the Americans to bring their domestic support payments in line with WTO obligations?

Mr Salardini : There's a possibility. Whether that's a short-term issue or a long-term issue is the question. In the short term, no, I don't see it. But I think there could be a pathway there, given enough time. An example is the UK showing that there's a pathway away from domestic support, as well.

Mr PASIN: We're very active, as you know, in the free trade space, and have been over our government's time in office since 2013. Given that the beef herd and our flock size are at historically low levels, is the NFF turning its mind to the very real reality that we're just simply going to be incapable, particularly in the protein sector, to take advantage of these opportunities that are presenting themselves?

Mr Salardini : I guess the answer to that is a very dry economic one. Markets fluctuate; they go up and down. What free trade agreements do is provide us the opportunity to get our goods to where we can get the highest value. so, even in a constrained market, where supply is short, we can increase the value of what we sell. Yes, there is an issue at the moment. There is a shortage of protein globally. But that's not a situation that will be there in the long term. In years to come, the market will come to a point where, potentially, supply might outstrip demand. So what it does is give us the opportunity, and what free trade—and the door that you guys have opened in terms of free trade—does is it allows us to maximise the value of whatever supply we do have.

Senator FAWCETT: My question can be for any of the three groups represented. One of you mentioned earlier the fact that the CPTPP is a team activity. Obviously the role of groups such as the Japanese government is critical in terms of new members joining. I'm just interested to know if any of you have engaged with your counterparts, or your stakeholders, customers or interlocutors, in Japan or other CPTPP nations to talk about new members and the collective benefits that would accrue from having any or specific new members join.

CHAIR: Who would like to start? Does anyone from the Minerals Council wish to comment?

Mr Marris : Not in any detail, as far as I'm aware. Demus?

Mr King : Yes. We regularly engage with our counterparts. I think the Japanese ambassador's speech on 21 July at the Press Club really highlighted the basis of the Australia-Japan relationship over many decades in trade, but also in terms of investment. Many of the Japanese companies that are operating in the minerals sector or are customers of Australian miners are very well developed in their relationships on a trade front. They have in many instances noted that they are also trading with countries that are not part of multilateral agreements, and the benefits associated with those multilateral agreements or those countries joining multilateral agreements. So, when I think of Taiwan and the relationships that companies in Taiwan have with both Australian miners and third-party companies, or countries such as Japan, the strength of the argument for participation is there. The Japanese ambassador, as I said, in his speech mentioned the CPTPP, AJCEP and other agreements as being fundamental to establishing a secure and prosperous region, and he encouraged accession by a range of countries to those agreements.

So I think, both at a commercial level—at a company-to-company level—and at a government level, there is quite a strong sense of the value and importance of those multilateral agreements, and increasing their membership.

CHAIR: Australian Chamber of Commerce and Industry, Mr Clark, do you wish to make any comments in response to Senator Fawcett's question?

Mr Clark : Yes, thanks very much. We've been engaged for a very long time with the Taiwanese government, and their office in Canberra in particular. They expressed interest in joining the original TPP while it was being negotiated, quite a number of years ago. So Taiwan, to me, is very interesting. We were also invited to go to Taiwan and to have some briefings with their ministries at that earlier time, when they were interested in it. What I find curious around that is, again, that they're seemingly so keen publicly to be part of this and yet have not made any formal accession approaches. It puts into my mind that there must be some barrier applying which is, so far, unseen.

The other group that we had particular conversations with about the TPP, again in its original form, was Indonesia, who publicly expressed interest in that while we were negotiating the commercial economic partnership—that is, CEPA—with them. And Australia and the industry groups and we used that as quite a lever in those negotiations, for concluding the comprehensive economic partnership in a form which would accelerate the ability for Indonesia to join the CPTPP at some future time, when they were able to do so. So, again, there have been some discussions with some nations and some industries, but not a comprehensive conversation.

CHAIR: Mr Salardini, do you wish to comment on this one?

Mr Salardini : Yes, thank you—another good question. Obviously, the agriculture sector has good relationships with a lot of industry and governments in CPTPP countries. In Japan, for example, our research and development corporations have actual boots on the ground in that market, and we are presenting at the annual general meeting, in October, of the Australia Japan Business Co-operation Committee. To date, we haven't formally raised the issue around CPTPP accession and the process, or who might or might not be good candidates, but I think that's actually a very good conversation to put on the agenda, so I've taken note of that suggestion.

CHAIR: Back to you, Senator Fawcett.

Senator FAWCETT: Thank you for those responses. For those who have engaged with existing CPTPP members, I'd just be interested to know—and I'm happy for you to provide this on notice—if there have been any barriers, or concerns raised about particular threshold issues, that would need to be addressed before members such as the UK, South Korea, Taiwan or others actually joined or rejoined the CPTPP. As I said, I'm happy for you to take that on notice.

CHAIR: Thanks, Senator. I think you mentioned that, if anyone wishes to provide advice on that, to do it on notice. If anyone wishes to make a comment on that now they may, otherwise you can take it on notice.

Mr Marris : We'll take it on notice, Chair.

CHAIR: Go ahead, Mr King.

Mr King : In all my discussions, I haven't come across any company or country that has indicated a resistance to accession by any country, including those that provided submissions to this committee. Certainly, it has been a very positive environment when I have spoken to embassies and companies. I note that in Taiwan's case, the China Steel Corporation, the Taiwanese company, did put in a submission and was very positive about accession to it. I wanted to reiterate the positivity of comments I've heard in all my discussions with a variety of embassies and organisations and companies to multilateral agreements and participation as broad as possible.

CHAIR: If there are no other responses to that, let's go to Mr Drum.

Mr DRUM: Thank you very much, Chair. I would like to go back and re-prosecute Senator Sheldon's questions. As a government, we've spent an awful amount of effort and money on encouraging Australians to pivot away from trade with China, due to the fact that—and I think we all acknowledge this—we're a little bit too far in. I understand it might be different with our resource sector, where we still seem to be trading mutually. But there appears to be a sheer, blatant disregard for a rules-based trading system. I have been very surprised this morning to hear your relative positivity about getting further involved with China. Ash, would you like to start with that one—especially as so many of our agricultural commodities are effectively having their relationships with China dropped at the eleventh hour, leaving our wine industry, our barley industry and our abattoirs exposed with a whole range of deals effectively dropped at the whim of the Chinese government.

Mr Salardini : You do raise an important concern, Mr Drum. On the flipside of that concern, there is still significant agricultural trade with China as we speak, so we have to balance those two positions. But you are right; there have been a lot of disruptions in the past 12 to 18 months. While I wouldn't say it's a blatant disregard of the rules—in fact, I think technically they are abiding by a lot of the rules in prosecuting their case, but maybe the spirit of the rules is missing there.

I think your point is around market diversification. The government has spent a lot of money, time and resources to start that market diversification agenda, and I think the agricultural industry is very much for it, but that doesn't mean closing off existing markets. I think I'm in agreement, but the focus is a little bit different. It's not to say you shouldn't trade with someone; it's more about opening up those opportunities to trade with others—growing the pie, and, by doing so, the share and concentration will dilute over time.

Mr DRUM: While I have you, Ash, local growers around the Goulburn Valley have spoken to me about some significant diseases within the apple industry in America. America effectively have the capacity to dwarf our domestic growing market—what they could export into Australia could dwarf what we currently grow—but they do have a couple of very nasty diseases. I would imagine a free trade agreement would not impact on our sovereign ability to keep those diseases out.

Mr Salardini : Again, Mr Drum, you're prosecuting my advocacy agenda for me. I'm not a biosecurity expert, but there are certain diseases in the American sector that, if they were brought here, would not only be given access but also create market access and non-tariff barriers for us in our existing markets. It is a live issue. I think they are seeking some of those measures to be removed to allow them access to our markets, so we are concerned about that. The apple industry is concerned about some of these thresholds and about how they are saying that they will handle these diseases. The apple industry in particular does not think the measures that they have put forward will actually handle the disease and the risk that the disease will spread into Australia, where we don't have it at the moment.

Mr DRUM: I'm interested also in hearing from the Minerals Council. I'm not sure who would be the best to answer this. Obviously, we are very strong exporters of iron ore into China. What are the other markets around the world? How reliant are China on Australia to provide them with high-quality iron ore? Is that an arrangement that exists purely because China doesn't have any other options, or is it that they have many options but they just prefer to deal with Australia? I wonder if someone could talk to me about the nuances associated with the iron ore import-export arrangements between Australia and China.

Mr King : The situation with iron ore and China: yes, we are the major exporter of iron ore to China. Australia is a low-cost producer of iron ore and has been for a long time. China does have more potential options—and I stress the word 'potential'—than Australia has alternative markets for its production. The other areas of production around the world are certainly in Latin America and South America but also, increasingly, in Africa. While the production costs associated with African iron ore are higher than Australia's, they would provide a potential alternative in the medium to long term if China were to focus on developing a more diversified supply of iron ore. Could they give up or set aside Australia in total? Certainly we don't think so, but they could increase alternative supplies from other parts of the world. There are a number of potential sources of iron ore in Africa—the continent—that could potentially be a part of that swing.

Mr DRUM: Thanks very much. It's a fantastic answer. That is exactly the background I was looking for. Mr Clark, how concerned are you about your band of industry participants that rely on a certain widget here or component there that has to come from China for the company to be competitive with whatever it is that they make?

Mr Clark : We're certainly concerned about vulnerable supply chains, and the current situations, both COVID and the tensions with our major trading partner, aren't helpful. As you rightly point out, Australia relies on a lot of imports in order to conduct our own business in order to then trade with the rest of the world. So there are two sides to this coin, and we need to make sure that we are concentrating on that. The efforts from the government have been welcomed, but, of course, we have closed borders, and the ability for traders to actually trade and form the relationships they need to secure those benefits are severely curtailed. We've certainly been encouraging the government to look at ways in which it can reopen the border in a safe way and at ways in which we can address some of the issues with freight constraints and supply chain constraints et cetera. Some of those things are outside the control of the Australian government. But you need to remember that virtually every export from Australia relies on an import already, and so we need both sides of this to be in focus. The more liberal that we can be, the better off we're going to be.

Mr DRUM: Thank you very much.

CHAIR: Thank you, Mr Drum. Do any of the witnesses have anything burning that they want to get off their chest before we close? Otherwise, I will wrap up the hearing. You all look very happy, so that's terrific. Thank you. It's been a very productive session for the subcommittee. We are very grateful for your time today. If you have been asked to provide additional material—and we may send you some questions on notice also—could you please provide that to the secretariat. We will be sending you a copy of the transcript of your evidence, to which you may suggest any corrections. Thank you very much for your time. I hereby declare this public hearing closed.

Subc ommittee adjourned at 11:01