25 November 2019

Customs Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019 &

Customs Tariff Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019

I rise to speak on these two bills, the Customs Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019 and the Customs Tariff Amendment (Growing Australian Export Opportunities Across the Asia-Pacific) Bill 2019, and I do so with a particular interest, given my role on both the Joint Standing Committee on Treaties and the Joint Standing Committee on Trade and Investment Growth. These bills implement tariff cuts agreed to by the government as a signatory to the Australia-Hong Kong Free Trade Agreement, the Indonesia-Australia Comprehensive Economic Partnership Agreement and the Peru-Australia Free Trade Agreement. I note that this enabling legislation is only able to deal with tariffs; it has no impact on the terms of the treaty signed by the government, because, as we know, only the government can enter into or alter all other terms on an international treaty.

We, in this place, all know that the international trading system is currently in a period of extraordinary instability. China and the US are engaged in retaliatory trade actions which have become nothing short of a trade war. Meanwhile, Japan and South Korea are also openly engaging in trade disputes. Now, more than ever, it is important that Australia affirms its commitment to free trade, and I am proud of the role Labor has played and will continue to play in supporting free trade, because trade ultimately benefits working people. It does so through its positive impacts on growth, on productivity and on jobs. As my colleague Senator Wong outlined in her contribution to this debate, from Chifley to today, Labor has been on the side of free trade. Opening our markets has been supported, in some form or another, by Whitlam, by Hawke, by Keating, by Rudd and by Gillard. Labor governments have supported opening our markets because they understood that, fundamentally, in trade there are economic opportunities for working people, and Labor always has been and always will be on the side of working people. It was Hawke and Keating who broke down Australia's tariff wall and brought Australia closer to the Asia-Pacific through the establishment of APEC. Given Australia's small population by global standards, it is important that we continue to push for greater access for our exporters into the world's growing markets.

It was the former Rudd Labor government that began negotiations for IA-CEPA back in 2013 after Prime Minister Rudd initiated a joint feasibility study with Indonesia in 2007. The treaty action was signed in Jakarta on 4 March 2019 and tabled in the parliament on 21 March 2019. These negotiations commenced under Labor because Labor understands and values the importance of our relationship with Indonesia. Indonesia is the world's third-largest democracy, with the world's largest Muslim population, and it's also our closest neighbour. Fostering this relationship is of significant importance to our future prosperity as a nation. Indonesia is a powerhouse developing economy in our region, with gross domestic product of US$1.02 trillion as of 2018. The nation continues to grow at a rate of over five per cent. In 2018 total two-way trade in goods and services with Indonesia was worth $17.6 billion, making Indonesia our 14th-largest trading partner. Based on current trends, Indonesia will move from the 16th-largest economy in the world to the ninth largest by 2030 and the fourth largest by 2050. Crucially, given how the growth in Chinese middle-class consumption has fuelled Australia's recent export success, Indonesia will have a consumer class of 135 million people by 2030. This domestic consumption rate represents the largest growth in consumers aside from China and India in recent times.

IA-CEPA aims to consolidate the economic partnership between our two nations. Currently Indonesia represents just two per cent of Australia's trade, with no growth trends over the past 10 years. There is clearly a need for improvement in this area. I am particularly focused on seeing the benefits realised by South Australian exporters in education, agriculture and resources. All of these industries will be granted greater access through this negotiated agreement. In education, IA-CEPA guarantees that Australian suppliers of certain technical and vocational education and training can provide services through majority Australian owned businesses in Indonesia. Australian VET providers can establish ventures in Indonesia with up to 67 per cent Australian ownership; previously the rate was 49 per cent. Australian universities will also be allowed to open campuses in Indonesia.

Other than the opportunities this provides for our educational exporters, these developments have the potential to assist Indonesia to meet its own workforce skilling as well as deepening broader ties between our two countries. Deepening people-to-people ties through education exchanges also presents opportunities to market Australia as a destination for Indonesian students, particularly in my home state of South Australia. In 2018 Australia received more students from Malaysia than from Indonesia, despite Indonesia's population being nearly 10 times larger. If Australia were to receive the same proportion of students from Indonesia as from Malaysia, this would add around 150,000 students to our national intake. Education is South Australia's largest service export. Through this agreement there'll be significant opportunities in this sector for my state.

There are also opportunities in agriculture. A significant proportion of Australian grain is exported to Indonesia but is currently uncompetitive, due to the high grain prices in Australia caused by drought conditions on the east coast. IA-CEPA seeks to cement the relationship in grain trade so that, despite current conditions, Australian farmers will be in a position to export to Indonesia when prices again become competitive. The Australian grain industry expects Australian wheat exports to be up to 25 per cent lower this year. It has stressed the need to be in a position to recover market share in Indonesia quickly when Australia's stocks improve and believes IA-CEPA will be crucial in this regard. Indonesia has no other bilateral agreement with a major agricultural exporter capable of providing the same quantities as Australia. South Australian grain growers already export around $200 million of wheat to Indonesia each year, and I am hopeful that these numbers will skyrocket with the guaranteed access built into this agreement.

IA-CEPA eliminates and reduces tariffs and locks in progressive tariff rate quota increases for major Australian exports into Indonesia. Indonesia will progressively eliminate tariffs on products including frozen beef and sheepmeat. South Australian exports in frozen meat products total $4.3 million. Whilst this number is modest, I'm hopeful that the greater opportunities provided in this agreement will see the number grow exponentially. The same goes for dairy, where tariffs will be progressively removed by Indonesia. In South Australia, dairy exports into Asia, particularly China, have been highly sought after. South Australian dairy companies will now have greater opportunities to export into an Indonesian market where dairy products are forming a greater part of the average Indonesian's diet. With respect to steel, Indonesia has agreed to reduce its existing tariff of 15 per cent to zero. Indonesia will also guarantee import permits for 250,000 tonnes of Australian steel per year.

Australia's agreement with Hong Kong is slightly different in nature, given that the two nations have been established trading partners for a number of years. In 2018 Australia's total goods and services exports to Hong Kong were valued at $13.4 billion. Australia's largest commercial presence in Asia is in Hong Kong across a wide range of industry sectors, including banking and finance, construction and engineering, food and beverage, education, consumer and retail, transport and professional services. Australian exporters have enjoyed tariff-free access into Hong Kong for a number of years. However, the government has advised that the Hong Kong agreement is necessary to ensure that these rates are locked in and legally enforceable.

Peru is also a growing market for Australian goods and services, with a gross domestic product around US$215 million. It has been one of the fastest-growing economies in Latin America and the world over the last 10 years. As of 2017, Australia's trade with Peru was worth $640 million. A number of Australia's competitors, including the US, Canada, the EU and Singapore, have FTAs with Peru. Australia's Peru agreement has been negotiated to ensure the elimination of tariffs on beef within five years; increased sugar market access; immediate duty-free access for Australian exports, such as wine, sheepmeat, horticultural products and wheat; and elimination of tariffs on iron ore, copper, nickel and coal. There will now also be the recognition of Australian degrees by Peru and the removal of barriers in services and trade for mining and the financial and telecommunications industries.

The Joint Standing Committee on Treaties tabled its final report on the Peru agreement in November 2018 and the Hong Kong agreement and the IA-CEPA report on 9 October 2019. JSCOT has reviewed the agreements and has ultimately recommended that the government ratify all three agreements. I want to make it clear that we did so following rigorous debate. Together with Labor's shadow minister for trade, Ms Madeleine King, my Labor colleagues and I sought various assurances through JSCOT's report on Indonesia and Hong Kong, which were reflected in its recommendations and general commentary. The issues raised included the termination of the existing Indonesia-Australia bilateral investment treaty, or BIT; the implementation of a process of economic modelling for future agreements; the need to ensure that the requirement for labour market testing is included in all trade agreements; and recognition of the very troubling political situation in Hong Kong.

The Indonesia, Hong Kong and Peru agreements all include modernised and improved ISDS provisions compared to the existing BITs. The modernised ISDS clauses in these agreements include safeguards on public health, environment and prudential regulations. It is therefore assumed that Australia will be protected from action against important policy reforms we may undertake in areas such as public health. These are protections that history tells us we most definitely need—protections that would protect our policy measures from companies like Philip Morris, who sought to sue the Australian government for Labor's plain packaging legislation.

While the proposed ISDS provisions may not be perfect, if these agreements are not ratified, Australia will be objectively worse off with regard to ISDS given the status of the current BITs. Upon entering into the Peru and Hong Kong agreements, the outdated BITs with those countries will be terminated. However, IA-CEPA has no such clause. This means that the IA-CEPA will initially co-exist alongside the BIT for the two sets of investment and ISDS provisions in force.

Why the BIT with Indonesia was not negotiated out is unknown, as negotiations remain confidential. But I am hopeful that further agreement can be found by Australia and Indonesia to terminate the existing BIT, and I expect that this will be advanced by the government as a priority. Labor's shadow minister has recently written to the minister, requesting the cancellation of the existing BIT upon entry into force of IA-CEPA.

The government is yet to produce economic modelling for free trade agreements considered by the parliament. Following the efforts of Labor members, JSCOT has also recommended the use of independent economic modelling to inform the drafting, negotiation and consultation processes for future FTAs. We'll continue to pressure the government to produce this economic modelling for future FTAs, because we know how important it is and how long it has been called for. While successive coalition governments have ignored previous recommendations of this nature, it is in good faith that we accept that this will change and that this issue will now have ongoing bipartisan support.

On an issue that was of significant concern to the trade union movement, IA-CEPA foreshadows a future resolution within three years of an agreement with Indonesia on the movement of natural persons, including contractual services supplies. I want to acknowledge the genuine concerns raised during JSCOT hearings by the union movement and put on the record that Labor members of JSCOT did try to amend the additional comments of the report in acknowledgement of these issues. Regrettably, this didn't get the committee's support. But I assure those concerned that Labor will continue to maintain pressure on the government to ensure that future agreements meet these requirements.

On the issue of market testing, Labor asserts that labour market testing should be applied within all trade agreements negotiated by Australia. Currently, IA-CEPA only waives labour market testing for intracorporate transferees. This is already an obligation under WTO rules, of which both Indonesia and Australia are signatories. There has been a lack of clarity provided in the IA-CEPA text about future agreements on the movement of people for work related reasons in other industries, and we believe that it is necessary that further clarity is provided in this regard, as it has been a key concern raised by the trade union movement and other elements of civil society. The government must ensure now that it will not undermine labour market testing and skills assessments by making side agreements with Indonesia that would not need to be formalised through the treaty-making process.

Another matter raised during JSCOT's consideration of the Hong Kong agreement was the continuing political uncertainty and instability in Hong Kong. This instability is, of course, of great concern to me and to many in this chamber because we agree that people have a right to protest peacefully. Labor has urged all parties to find a peaceful resolution that is consistent with the 'one country, two systems' arrangement currently in place with the People's Republic of China. My Labor colleagues and I ensured that JSCOT's report acknowledged concerns about the political situation in Hong Kong, and that was the right thing to do. The concerns raised throughout JSCOT's consideration of these agreements and the concerns raised by the union movement and some of my Labor colleagues are genuine. I acknowledge them in my remarks today, and I acknowledge that they come from a position of putting the interests of working people first.

Yet ultimately, on the whole, these agreements provide opportunities for Australia. They provide opportunities for growth, for productivity and for jobs. These are opportunities that are so greatly needed in my home state of South Australia, and they are opportunities that I support. Australia is an export nation. On average, Australian businesses that export hire 23 per cent more staff, pay 11 per cent higher wages and have labour productivity 13 per cent higher than nonexporters. One in five Australians is employed in trade related employment. Australian household incomes are estimated to be on average around $8,500 higher as a result of opening up new markets through trade. China is our largest economic partner, with trade worth $183 billion, including a third of Australia's total exports. However, we cannot rely on this market alone. It is imperative that we start to diversify towards other growing Asian markets.

This is particularly crucial from a South Australian perspective with regard to our education and goods exports. The three agreements that are the subject of these bills present particular opportunities for South Australia, and they come at a most critical time. According to a Business SA William Buck survey of business expectations, business confidence hit record lows in South Australia in the three months to the end of September. Business SA chief executive Martin Haese blames South Australia's high unemployment, interest rate cuts, land tax uncertainty, geopolitical tensions and ongoing high utility costs for the fall. Mr Haese has called on the state government to double down on exports growth to negate the current trend South Australia finds itself in. South Australian exports have declined 18 per cent over the last 12 months. With our population continuing to decline by national standards, greater access to international markets will be needed to ensure my state's continued prosperity. SA's exports to Indonesia are forecast to skyrocket to more than $1 billion as a result of IA-CEPA. South Australians here in this chamber will know that exports had crashed to just $290 million in 2018, down from $718 million in 2011. As I have already canvassed in my remarks, wheat, beef, sheep and citrus farmers will benefit, along with dairy producers.

More than anything, the opportunities provided by IA-CEPA in education will simply build on the great work South Australian universities are already undertaking in Indonesia. For example, the University of South Australia has already developed collaborative partnerships with a number of their Indonesian counterparts. In 2015-16, UniSA's School of Information Technology and Mathematical Sciences delivered a customised version of the Graduate Certificate in Data Science to senior public servants from Indonesia as part of the Australian government's international development program. UniSA, along with the University of Adelaide and Flinders University, as well as South Australian VET providers, will now be provided with greater opportunities to own and to operate educational facilities in Indonesia. The economic and social benefits of this to South Australia cannot be overstated. As I have already said today, education is South Australia's greatest service export. I want to see my state continue to reap the economic benefits of its growth.

I will be supporting this bill. I'm supporting it, because I'm on the side of jobs. I'm on the side of greater opportunities for working people. I am on the side of economic growth and opportunity for my home state of South Australia. There are jobs across our wine, transport, education, agriculture and service industries in trade. Trade agreements open up markets. They open up opportunities—opportunities that wouldn't and couldn't exist under protectionism and that wouldn't exist if we stood by and let other countries benefit from trade agreements whilst we stood on the sidelines and watched opportunity go by. Yes, there is room for improvement, certainly, in how these agreements are drafted and consulted upon, and there have been genuine concerns raised about some of the content of these agreements. But ultimately what is within these agreements stands to benefit working people. These agreements stand to benefit South Australia, and my state cannot afford to sit on the sidelines. We cannot afford to sit idle. We can never let opportunities for growth and for jobs to pass us by. All three of these agreements present significant opportunities—significant jobs—to my state. These are opportunities which I thoroughly and wholly support.