Introduction
2.1
This chapter examines the merits of the CPTPP for Australian trade and investment, and the case for expanding the agreement.
The role of the CPTPP in Australia’s free trade agenda
Australia’s free trade architecture
2.2
International trade and investment is important to the Australian economy. The Department of Foreign Affairs and Trade highlighted that:
Trade as a whole is equivalent to 45 per cent of Australian GDP and is directly responsible for one in five Australian jobs. Businesses with foreign investment generate around 40 per cent of Australia’s exports, and foreign investment supports one in ten jobs in Australia.
2.3
Australia currently has 16 free trade agreements (FTAs) in force consisting of three multilateral, one regional and 12 bilateral FTAs.
2.4
Over recent years, Australia has continued to pursue an ambitious open trade and investment agenda since 2011:
Regional Comprehensive Economic Partnership (RCEP) – 1 January 2022
Australia-United Kingdom (Free Trade Agreement (A-UKFTA) – signed on 17 December 2021 but yet to come into force until later in 2022
Pacific Agreement on Closer Economic Relations Plus (PACER Plus) – 13 December 2020
Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) – 5 July 2020
Peru-Australia (PAFTA) – 11 February 2020
Australia-Hong Kong (A-HKFTA) – 17 January 2020
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – 30 December 2018
China-Australia Free Trade Agreement (ChAFTA) – 20 December 2015
Japan-Australia Economic Partnership Agreement (JAEPA) – 15 January 2015
Korea-Australia Free Trade Agreement (KAFTA) – 12 December 2014
Malaysia-Australia Free Trade Agreement (MAFTA) – 1 January 2013
Overlapping free trade agreements
2.5
The Committee is aware that, in addition to the CPTPP, Australia is party to 12 bilateral and multilateral trade agreements involving CPTPP existing members and applicants.
Bilateral agreements
2.6
Australia’s nine bilateral trade agreements involving CPTPP members and applicants are discussed below in alphabetical order.
2.7
The Australia-Chile Free Trade Agreement (ACI-FTA) entered into force on 6 March 2009 and was the first such Australian agreement with a Latin American country.
2.8
The Australia-New Zealand Closer Economic Relations Trade Agreement (known as ANZCERTA or the CER Agreement) was signed in 1983. It is one of the most comprehensive bilateral free trade agreements in existence, covering substantially all trans-Tasman trade in goods, including agricultural products, and was the first to include free trade in services.
2.9
The Australia-United Kingdom Free Trade Agreement was signed on 17 December 2021 and is yet to be ratified.
2.10
The China-Australia Free Trade Agreement (ChAFTA/CAFTA) entered into force on 20 December 2015.
2.11
The Japan-Australia Economic Partnership Agreement (JAEPA) entered into force on 15 January 2015.
2.12
The Korea-Australia Free Trade Agreement entered into force on 12 December 2014.
2.13
The Malaysia-Australia Free Trade Agreement (MAFTA) entered into force on 1 January 2013.
2.14
The Peru-Australia Free Trade Agreement (PAFTA) entered into force on 11 February 2020.
2.15
Singapore-Australia Free Trade Agreement (SAFTA) entered into force on 28 July 2003, subsequent amendments entered into force on 24 February 2006, 13 February 2007, 11 October 2007, 2 September 2011, 1 December 2017, and 8 December 2020.
Multilateral agreements
2.16
The Australian Government has ratified three multilateral agreements that overlap with CPTPP existing members and applicants. They are discussed below in alphabetical order.
2.17
The Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) entered into force in January 2010 for Australia.
2.18
Participating countries in the AANZFTA include ASEAN member states plus New Zealand, namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
2.19
The Pacific Agreement on Closer Economic Relations Plus (PACER Plus) is a development-centred free trade agreement between Australia and New Zealand and the Pacific island nations of Samoa, Kiribati, Tonga, Solomon Islands, Niue and Cook Islands.
2.20
PACER Plus entered into force on 13 December 2020. Nauru, Tuvalu and Vanuatu have signed the agreement but have not ratified.
2.21
The Regional Comprehensive Economic Partnership (RCEP) is a regional free trade agreement signed by ASEAN nations (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) and ASEAN's free trade agreement partners (Australia, China, Japan, New Zealand and the Republic of Korea).
2.22
RCEP has been ratified (or equivalent) by Australia, New Zealand, Brunei Darussalam, Cambodia, China, Japan, Laos, Singapore, Thailand and Vietnam.
2.23
RCEP entered into force on 1 January 2022, with Australia as an original party.
2.24
The Committee received submissions and heard witness statements expressing differing views on the effectiveness of overlapping trade agreements.
2.25
The Department of Foreign Affairs and Trade (DFAT) expressed the view that the CPTPP allowed for ‘building on Australia’s existing FTAs.’ For example:
…through the CPTPP Australia secured improved access across a range of goods exports to Japan, beyond those in JAEPA, including on Australian beef. For Australian wine entering Vietnam, the CPTPP will achieve full tariff elimination on sparkling wine by 2028, with exporters benefiting from faster tariff reductions than under AANZFTA.
2.26
DFAT further stated that ‘[e]xpansion will complement, not compete with Australia’s existing FTA network.’
2.27
DFAT submitted that ‘it is important to note that accession to the CPTPP would not preclude also negotiating a bilateral FTA or upgrading of an existing FTA with Australia. Similarly, upgrading or securing a new bilateral FTA with Australia does not preclude an economy’s future accession to the CPTPP. Each avenue presents an opportunity to identify gaps or improve terms for Australian exporters, or to address other issues such as non-tariff barriers.’
2.28
However, DFAT also conceded that ‘ultimately, the best pathway for expansion of Australia’s trade opportunities will vary depending on the economy in question.’
2.29
DFAT further acknowledged that the CPTPP ‘may not be suitable for all trading partners, including those whose current trade and investment settings would make it difficult to meet the Agreement’s high standards or comply with its rules.’
2.30
Overlapping trade agreements continue to facilitate trade between Australia and CPTPP parties that have not yet ratified the CPTPP (Brunei Darussalam, Chile and Malaysia), as explained by Ms Elizabeth Bowes, Chief Negotiator for the CPTPP from DFAT:
…Chile predates [the CPTPP], so that's a slightly different scenario. With Malaysia we have a bilateral agreement. Both Malaysia and Brunei are also parties to the Australia-New Zealand-ASEAN FTA as well as RCEP, which is not yet in force. So we have a number of agreements that already govern our trade relations with those four countries.
2.31
Ms Bowes still advocated for the ratification of the CPTPP by these parties as the ‘benefit of their ratification to the CPTPP would (1) reinforce the value of the agreement and (2) provide that common set of rules amongst all the countries that are party to the CPTPP.’
2.32
However, Mr Bryan Clark from the Australian Chamber of Commerce and Industry, raised concerns about Australia’s ‘noodle bowl’ of existing overlapping trade agreements that should be rectified through the amalgamation of such agreements with the CPTPP:
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.
2.33
Mr Clark further stated that ‘[w]hile 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.’
The value of the CPTPP
Reinforcement of a rules based international order
2.34
The Department of Foreign Affairs and Trade submitted that ‘[a]s well as economic benefits, expanding the reach of the CPTPP will advance our foreign policy objectives by strengthening our bilateral relationships.’
2.35
The Department of Defence similarly expressed the view that the ‘CPTPP provides an opportunity to strengthen international relationships and contribute to stability in our region.’
2.36
The Department of Defence further highlighted strategic benefits of the agreement:
While free trade agreements, such as the CPTPP, have exemptions that exclude items on national security grounds, including those related to defence industry, we anticipate broader benefits beyond this sector to Australia. In addition to economic benefits, these include advancing our overarching strategic interests in peace, stability and mutual commitment to international rules and norms in the region.
2.37
National President and Chairman of the Australia China Business Council (ACBC), Mr David Olsson, described how the CPTPP differs from other existing international trade arrangements:
Its intention was to bring together the nations of the East Asia-Pacific region to create a strong economic trading bloc that drove integration that was specifically designed to go beyond just the removal of tariffs to include many social issues as well. Its whole primary function is to try and create better jobs, better flow of people, better flow of capital across the management of the environment—things that aren't normally contained in a trade agreement and certainly things that are not contained within the WTO. They are different. They're complementary; they work together.
2.38
The ACBC elaborated that the CPTPP is a new form of trade agreement with more ambitions:
CPTPP belongs to a more advanced category of a ‘new generation’ free trade agreements (FTAs) in that it regulates not just the free flow of goods and services, but also encompasses a set of political and social objectives related to free market and fair competition. The underlying policy intent is for a mechanism to raise living standards, create jobs and deliver more sustainable growth across the region.
2.39
The ACBC suggested that the CPTPP can ‘play a critical role in resisting protectionism and bolstering support for an open economy supported by enforceable rules.’
2.40
Melbourne academic and international trade expert Professor Gabriele Suder pointed to the importance of rules and norms in areas including the environment, labour rights and intellectual property, submitting that the CPTPP is a symbol of collaboration and willingness to abide by high standards for those involved:
The CPTPP is symbolically strong, a signal in that it showcases political or economic concessions possible in the region and beyond it, that have made provisions possible around labour rights, environmental and intellectual property protections and dispute resolution mechanisms across its members. This requires in-depth negotiation and willingness of all parties concerned to work on common objectives in the longer term. This is what also reassures companies when it comes to investment decisions that provide deep commitment and engagement with a location and region, and their community.
2.41
The Perth USAsia Centre submitted that ‘improving the CPTPP’s regional coverage will also ensure that a high-standard model for trade liberalisation is secured for the Indo-Pacific.’
2.42
The ACBC suggested that the CPTPP can ‘play a critical role in resisting protectionism and bolstering support for an open economy supported by enforceable rules.’
2.43
The Minerals Council of Australia stated ‘it is in Australia’s national interest to support multilateral efforts which strengthen the global rules-based trade order’ as it ‘continues to benefit from trade liberalisation and integration.’
2.44
Trade policy advisory firm Article Three highlighted that ‘[v]arious mechanisms for ongoing cooperation and dialogue built into the agreement can be effective in strengthening bilateral relationships and facilitating cooperation on technical and regulatory issues.’
2.45
Professor Gabriele Suder emphasised that trust between CPTPP members will allow the agreement to thrive:
…the trust relationship makes these agreements truly productive. We can't expect that, because there's an extension of the CPTPP to certain markets, it will immediately allow productive relationships or market access, or whatever it might be.
2.46
Mr David McCredie OBE, the Chief Executive Officer of the Australia British Chamber of Commerce expressed the view that the CPTPP provides a deeper relationship:
Trading relationships are not just transactional. I'm happy to sell my used car to whomever wants to buy my used car, but when I am thinking about selling a national asset—and that's why we have the FIRB—whether it be power lines, energy generation or certain critical infrastructure, we have to have an element of: is who I'm selling this to somebody I can trust, and does that level of trust meet the threshold that we expect? Those are the things that underpin investment relationships, and I think that goes a bit further.
2.47
Mr John Berry from Article Three stated that the ‘original text of the agreement stated that the agreement should strengthen the bonds of friendship and cooperation between parties and their peoples and build on their respective rights and obligations under the Marrakesh agreement establishing the WTO.’
2.48
Dr Jeffrey Wilson from the Perth USAsia Centre advocated for the advantages that the CPTPP provides for Australian businesses:
…ultimately Australia's economic security and prosperity in the world hangs on there being a functional global trade system, and that's seriously under threat at the moment. When we think about the CPTPP, we can think about getting a bit of preference for our beef producer over an American competitor in the Japanese market. The real question for the future of Australia is: do we have a robust global trade system? I would argue that that's the ability of the CPTPP.
2.49
Former Australian Prime Minister, the Hon Tony Abbott AC stated the CPTPP represents more than an agreement to increase trade. It acts as ‘a timely sign of democratic solidarity in a world where democracies still need to stand together for global peace, prosperity and freedom.’
2.50
The International Institute for Strategic Studies’ (IISS) submitted that ‘the CPTPP is an important force for rules-based free and fair trade’ and is in Australia’s best interest to ‘use the CPTPP to strengthen its economic resilience’ as well as ‘how Australia and fellow CPTPP members might pursue collective economic defence.’
2.51
The IISS emphasised the broader importance of the CPTPP as more than just a multilateral trade agreement:
Australia should see the CPTPP not simply as a trade agreement, but as an institution that brings together likeminded countries that want to promote free and fair rules-based international trade and use their growing trade with one another to bolster their economic security.
2.52
The Perth USAsia Centre discussed that although the CPTPP ‘was fundamentally designed as a rule-making agreement’ to institutionalise ‘its set of advanced trade rules.’
A vehicle for prosperity in a post COVID world
2.53
The Department of Foreign Affairs and Trade (DFAT) expressed the view that the CPTPP would assist in global economic recovery following the COVID-19 pandemic:
The COVID-19 pandemic has challenged not only our health systems, but also our economic and trading systems. The crisis has reinforced the critical importance of functioning and resilient supply chains that sit within an open, transparent and stable trading environment, for which the CPTPP provides a strong foundation.
2.54
The Department of Defence submitted that the CPTPP would support Australia’s interests in a region economically affected by the pandemic:
Particularly in the wake of the economic effects of the COVID-19 pandemic, expanding the membership of the CPTPP to countries who share Australia’s commitment to free trade and the rule of law supports Defence’s own efforts in advancing Australia’s interests in the Indo-Pacific.
2.55
The Minerals Council of Australia noted that the unpredictable fallout of the global pandemic will continue to impact international trade into the foreseeable future which the CPTPP may help hedge against:
With Australia’s trade-exposed economy especially susceptible to shifts in global demand, there is an enduring national interest in ensuring the conditions for open trade and investment are as secure as possible and continue to be supported by an effective rules-based international order. An expanded and renewed CPTPP would contribute to this objective.
2.56
Article Three, a policy advisory firm specialising in Asia-Pacific trade, recognised the importance of the CPTPP for Australia and other member states ability to recover from the COVID-19 pandemic as ‘expanding the agreement would deliver benefits for Australia and for exporters and traders in the region. It would also help drive greater trade activity, which is needed to support post-COVID economic recovery.’
2.57
The Australia China Business Council (ACBC) stressed that the CPTPP would be a crucial multilateral arrangement for economic recovery from the pandemic:
Free and open trade is critical to global recovery from the COVID-19 pandemic. Such an environment will not only enable Australian enterprises to grow business in existing markets, it will enhance their ability to expand into new markets. These opportunities are best developed under the rules-based protection of multilateral agreements such as the CPTPP.
2.58
DFAT expressed the view that ‘[a]dditional accessions to the CPTPP represent a valuable opportunity for Australia to diversify its trade.’
2.59
Ms Elisabeth Bowes, DFAT First Assistant Secretary, Regional Trade Agreements Division, and Chief Negotiator for the CPTPP stated that the CPTPP may assist in building more resilient international supply chains:
…under the CPTPP, there is one set of rules for exporting and recognition of inputs from each of those countries, which then enhances the resilience of supply chains, be it in the COVID context or more generally. That reinforces the importance of global value chains, so basically it means that trade is more efficient and potentially cheaper for those participating in this network of common sets of rules and standards.
2.60
Mr Jon Berry from trade policy advisory firm Article Three endorsed an expanded CPTPP membership as being highly beneficial for Australia:
The greater the coverage of the agreement, the greater the benefits for members. The benefits include better market access and increased participation in expanded regional value chains—especially, the more major economies in Asia are members of this agreement, the fewer distorting effects we'll have of value chains in that important part of the world.
2.61
The Taiwanese Chamber of Commerce Western Australia (TCCWA) emphasised that ‘Taiwan’s inclusion in the CPTPP will help in diversification of markets for both sides, make supply chains more resilient, and create back-up facilities.’
2.62
Academic Dr Richard Herr OAM similarly stressed that multilateral trade agreements such as the CPTPP will improve Australia’s economic resilience:
…it's very much in Australia's national interest to have a wider range of supportive country arrangements, multilateral agreements and the like that reinforce a rules-based and rules-compliant international economic order. Both Dr Bergen and I believe that the CPTPP will significantly add to the pressure for broader compliance with economic good citizenship across the globe.
2.63
Dr Shumi Akhtar, Associate Professor at the University of Sydney’s Business School submitted that:
Australia’s imports hit their lowest levels in the entire 30-year history in 2020. Australia’s 2020 exports were also down to the same level as 5 years ago in 2015. These twin phenomena are not surprising, and result from Australia’s overreliance on China and failure to diversify into other markets over the last few decades.
2.64
In referring to ‘the ongoing trade war between China and Australia’ and Australia’s reliance on China, Dr Akhtar further expressed the view:
The current state of our trading partners and trading activities is so backward that it is embarrassing to say the least, given the numerous resources and riches that Australia is blessed with. Our lax immigration policy, greed and short term commercialised mindset got us into the troubling situation that we find ourselves in today.
A high quality agreement with high quality standards
2.65
The Department of Foreign Affairs and Trade expressed the view that the CPTPP’s standards will foster greater regional economic integration:
The CPTPP rules go further than our other FTAs in many respects and help to increase standards and norms for trade and economic engagement across the Indo-Pacific region. The CPTPP provides greater consistency between Parties on rules of origin, as well as in the regulation of investment, intellectual property and e-commerce. This supports both better-integrated and more resilient regional value chains, and reinforces the value of an open, transparent and stable trading environment.
2.66
The Australia China Business Council highlighted several areas in which the CPTPP sets high standards:
removal of non-tariff barriers and quota reductions;
rules around cutting red tape;
helping small businesses to succeed in trade;
the digital economy and data flows;
innovation and intellectual property protection;
the movement of skilled workers and capital;
binding rules to protect the environment and promote working conditions; and
rules that address the distortion of free competition by state-owned enterprises (SOEs) and government subsidies.
2.67
Dr Jeffrey Wilson from the Perth USAsia Centre, suggested that these high standards can serve as a benchmark framework for CPTPP members to ‘champion’ in other international trade agreements:
If we've all agreed to approach some aspect of digital services in the CPTPP when we have a WTO discussion, or even when Australia discusses that in the FTAs with the UK and the EU we're negotiating, then that becomes something where we say: 'We've already done that. There's some template or boilerplate text here.' We might not cut and paste it directly, but it becomes a reference point for rule-setting in other forums.
2.68
However, the Australian Chamber of Commerce and Industry questioned the quality of the agreement saying:
2.69
‘”High” standards are in the eye of the beholder. There is no reference point for this to gauge the “standard” of any trade agreement.’
2.70
The Australian Chamber of Commerce further remarked on the difficulty in understanding whether the standards are being met without adequate analysis:
The Australian Government does not analyse the success or otherwise of its trade agreements. Without regular empirical analysis that our negotiating objectives are being met, we cannot tell the quality of any given agreement, let alone the cumulative set. The Government should undertake regular assessments of Australia’s treaties as recommended by previous inquiries.
2.71
Former Australian Prime Minister the Hon Tony Abbott AC described the CPTPP as ‘the most comprehensive free trade grouping outside Europe.’
2.72
The Freight and Trade Alliance and Customs and Global Trade Law joint submission declared that ‘the CPTPP is an excellent vehicle to expand Australia’s trading relationships. The CPTPP is a high quality agreement from various viewpoints,’ including:
1
The level of market access granted by the members;
2
The quality and diversity of members;
3
The rules of origin which specify which goods qualify for preferential treatment under the CPTPP; and
4
The documentation requirements association with proving that goods qualify for preferential treatment.
2.73
Article Three elaborated that the CPTPP can assist in harmonising international trade in various areas:
[It can] help set “high standards” and common rules governing trade in a range of areas of economic activity (e.g.: competition policy, investment, services, electronic commerce) across the region.
2.74
The Minerals Council of Australia similarly endorsed the CPTPP to be a ‘high quality trade agreement,’ in a range of different contexts:
[Its] provisions are more comprehensive than most free trade agreements and cover issues related to small businesses, environmental protection and labour standards, digital integration and e-commerce and state-owned enterprises.
2.75
DHL Express Australia endorsed the CPTPP’s reduction of tariffs and trade barriers:
The CPTPP sets a high benchmark in traditional and new areas of trade, including e-commerce, Government procurement, investment protection and environmental standards etc… DHL Express welcomes any expansion of the CPTPP as it would serve to address the unfortunate increase in Non-Tariff Barriers (NTBs) hampering trade, such as complex border clearance processes with prescriptive certificate of origin and refund policies.
2.76
The Australian Chamber of Commerce and Industry highlighted ‘Australia has championed the use of preferential trade agreements as “stepping stones” on the path to achieve free trade, that:
…completely “free” trade is not a result of preferential trade agreements. Preferential Trade Agreements (PTAs) contain a set of discriminatory terms with which parties will deal with each other at the exclusion of others. Once such an agreement is completed the result usually is that while some liberalisation of trade and investment may occur, other barriers to trade are retained and some new ones introduced.
2.77
Mr Russell Wiese from Customs and Global Trade Law stated that the CPTPP has an ‘ease of use’ that makes it an ‘easier FTA’ which is ‘probably going to achieve better FTA outcomes for Australia than if it tried to get a bilateral FTA.’
2.78
Mr Clint Latta, Head of Trade and Policy at the Freight and Trade Alliance similarly endorsed the CPTPP’s ease of use for Australian businesses:
Rather than having seven, eight or nine different sets of rules of origin or documentary requirements, we find the CPTPP a much simpler scheme or free trade agreement. There isn't a cumbersome certificate of origin process, so our membership is largely in favour of that… An expansion of the CPTPP means much easier access to the benefits under the scheme for a lot more of our members.
2.79
Mr Latta also highlighted the ease which the CPTPP’s declaration of origin provides for traders:
Under the CPTPP, what we have is a requirement not for a certificate of origin but for a declaration of origin, which is simply made by the supplier, the importer or anyone in a position of management or control. That greatly simplifies it for everyone involved in obtaining the benefits at the border. Currently, with a lot of other FTAs, if you don't hold that certificate of origin, you can go back retrospectively, but there are also time limitations on how far you can go back. So to simply have a declaration of origin under the CPTPP is far easier.
2.80
Mr Arnold Jorge, Chief Executive Officer at the Export Council of Australia highlighted some streamlined elements of the CPTPP:
The CPTPP has notable innovative elements, including on digital trade, where members have committed not to impose duties on electronically transmitted content and not impose localisation requirements. It provides a single set of rules of origin and allows content from all CPTPP economies to be accumulated. It liberalises trade in services beyond commitments in the WTO. It also includes workforce and environmental commitments.
2.81
Ms Karen Batt, Head of International at Standards Australia detailed the importance of international standards for international trade:
International standards are the cornerstone of international trade, particularly when they are used as the basis for regulations, and it is vital that they are promoted and used in the CPTPP economies to improve market access for Australian industry by breaking down technical and regulatory barriers to trade. International standards create a common language across borders by allowing businesses to meet the same requirements across markets, reducing the compliance costs that can be associated with meeting a variety of different national standards. They are also a vital tool in ensuring products and services are interchangeable and compatible, which is crucial to support the ambitions under the agreement to facilitate the establishment of global value chains in the CPTPP region.
2.82
As such, Ms Batt from Standards Australia welcomed the provisions with the CPTPP which promote more harmonious standardisation amongst its members:
As Australia's national standards body and representative of ISO and IEC, we are particularly supportive of the provisions of CPTPP that promote transparent, non-discriminatory rules for developing technical regulations and internationally harmonised standards, including the obligations to use international standards unless there is a legitimate policy objective that supports not doing so. We are also pleased that the agreement includes provisions to promote cooperation between the parties to the agreement, to promote the use of international standards and to ensure that technical regulations do not create unnecessary barriers to trade.
2.83
The Minerals Council of Australia outlined that the CPTPP facilitates the reduction of international trade hurdles:
…removing barriers to trade and investment will allow Australian mining to maximise its potential and leverage industry capabilities to develop opportunities in emerging areas such as critical minerals processing and refining and the expansion of METS businesses into new markets.
2.84
The Minerals Council of Australia detailed that as ‘most substantial opportunities for the Australian mining sector continue to be in Asia.’
2.85
Expanding the CPTPP was further advocated by the Minerals Council of Australia for freer trade:
Making the most of these opportunities will require reducing the range of behind the border barriers, non-tariff measures and policy impediments that continue to constrain and distort trade. High quality regional trade agreements such as the CPTPP are a key vehicle for achieving this outcome.
2.86
Former Prime Minister the Hon Tony Abbott AC remarked in his submission that the CPTPP is ‘certainly a more sophisticated and broader-based agreement than the Regional Comprehensive Economic Partnership (also including Australia) that China sponsored but that India has refused to join.’
2.87
The Australian Chamber of Commerce and Industry (ACCI) alternatively favoured the Regional Comprehensive Economic Partnership Agreement (RCEP):
…RCEP is more reflective of our key trade relationships and supply chains than CPTPP. One option would be for Australia to champion the combining or harmonisation of CPTPP with RCEP. Australia should also encourage membership accession from nations with whom we have no existing trade treaties, to improve trade outcomes without the need for additional negotiation.
2.88
The ACCI also questioned the quality of the CPTPP agreement saying:
‘”High” standards are in the eye of the beholder. There is no reference point for this to gauge the “standard” of any trade agreement.’
Trade dispute resolution mechanism
2.89
Mr David Olsson, National President and Chairman of the Australia China Business Council, detailed the CPTPP’s dispute resolution mechanism:
It's very much aligned with the WTO processes. It encompasses a consultation period, when parties must get together to try and sort out, amicably, their issues. If they can't, then it moves into a more formal process with appointed arbitrators to try and resolve it. Parties have a choice between which platform they can go through for resolution. They can make a determination to go through the WTO processes or through the TPP processes. That's a choice that the parties can make themselves, and that will be dependent very much upon the nature of the dispute, because one is far more detailed than the other.
2.90
Mr Jon Berry from trade policy advisory firm Article Three stated the CPTPP could not promise to eliminate any trade disputes that may arise:
It cannot completely prevent trade disputes from arising between parties and nor can it prevent foreign policy disputes more broadly and that's not what it was designed to do. The original text of the agreement stated that the agreement should strengthen the bonds of friendship and cooperation between parties and their peoples and build on their respective rights and obligations under the Marrakesh agreement establishing the WTO.
2.91
The Australian Fair Trade and Investment Network (AFTINET) expressed concern that the CPTPP ‘intrudes into more areas of regulation normally subject to democratic national decision-making processes than any previous trade agreement.’
2.92
AFTINET elaborated on the CPTPP provisions it felt might intrude on members states and their national sovereignty:
…corporate rights to sue governments (Investor-State Dispute Settlement or ISDS), restrictions on government regulation of essential services like aged care and state regulation of carbon emissions, temporary movement of people, reduced capacity for local industry development, restrictions on government
2.93
ActionAid noted that ‘while the CPTPP does exclude public services, the narrow definition of these services as those “supplied neither on a commercial basis nor in competition with one or more service suppliers” raises questions about the effectiveness of these exclusions in a context where many public services are delivered alongside private services.’
Greater market access
2.94
The Department of Foreign Affairs and Trade highlighted the recent value of existing CPTPP members to Australia’s economy:
In 2019-20 around 25 per cent of Australia’s beef, 10 per cent of sheepmeat, 63 per cent of pork, 22 per cent of cereals and grains, 33 per cent of dairy, 30 per cent of sugar, 12 per cent of cotton, and 15 per cent of wine exports went to CPTPP Parties;
Australia’s exports from the minerals and fuels sector to CPTPP Parties were worth around AUD 51 billion, with manufactured and other goods worth around AUD 22 billion;
In 2019 around 15 per cent of the Australian stock of investment abroad (valued at approximately AUD 447 billion) was in CPTPP economies; and
17 per cent (worth AUD 15.3 billion) of Australia’s services exports went to CPTPP economies in 2019-20.’
2.95
The Department of Foreign Affairs and Trade outlined that the CPTPP builds on its predecessor’s level of market access:
…importantly for Australia, the CPTPP maintains the substantial market access package secured in the original TPP for goods and services and government procurement, as well as commitments on regulations on foreign investment.’
2.96
DFAT highlighted tariffs that would be eliminated and increased market access for exporters as a result of the CPTPP:
New reductions in Japan's tariffs on beef, with Australian exports worth AUD 2.4 billion in 2019-20.
New and preferential access for dairy products into Japan, Canada and Mexico – including new quotas for dairy products including cheese, milk powders and butter for Mexico and Canada
elimination of tariffs on milk protein concentrates for Canada on entry into force;
elimination of Mexican tariffs on yoghurt;
the elimination of a range of cheese tariffs for Japan covering over AUD 100 million of trade.
New sugar access into Japan, Canada and Mexico markets – including elimination of the tariff on refined sugar into Canada; and a guaranteed 7 per cent quota of Mexico’s imports of sugar by volume.
Elimination of beef tariffs in Canada within 5 years and Mexico within 10 years of entry into force.
Tariff reductions, and new access for our cereals and grains exporters into Japan, including for the first time in 20 years, new access for rice products into Japan.
Elimination of all tariffs on sheepmeat, cotton and wool by all Parties, in most cases on entry into force.
Elimination of tariffs on seafood, horticulture and wine, including the removal of tariffs faced by Australian wine in Canada, our fourth largest wine export market, and all of Mexico’s tariffs for higher quality wine from 1 January 2020.
Elimination of all tariffs on certain industrial products (manufactured goods) by all Parties.
Elimination of Canada’s 2.5 per cent tariff on salt on entry into force.
2.97
Regarding investment, DFAT submitted that the CPTPP ‘secured preferential investment screening thresholds in CPTPP economies, and new openings in key markets such as mining and resources, telecommunications and financial services. The Agreement also delivers a more liberalised and predictable regime for the regulation of foreign investment.’
2.98
The Department of Agriculture, Water and the Environment (DAWE) outlined the greater market access already delivered by the CPTPP:
The CPTPP has delivered immediate and enhanced tariff reductions across key markets in the Americas and Asia for Australian agricultural and food exports including for wine, beef, dairy, horticulture, seafood, grains and sugar. It has delivered new market access in Canada and Mexico and builds on Australia’s existing bilateral free trade agreements.
2.99
Wine Australia, a statutory body operated under the Wine Australia Act that controls the export of grape products, similarly submitted that a reduction in protective measures is beneficial for the sector:
…the most useful elements of the CPTPP to Australia wine exporters are:
the inclusion of an Annex in Chapter 8 (Technical Barriers to Trade) that is specific to wine and spirits; and
the simplified and flexible certification arrangements including the ability for certificates of origin to be supplied electronically.
2.100
Australian Grape and Wine similarly welcomed ‘the inclusion of a sector specific annex to address technical barriers to trade’ as the ‘annex helps to address technical barriers to trade for Australian wine exporters in regard to:
Streamlining certification requirements;
Mutual acceptance of Oenological (winemaking) Practices;
Labelling Requirements; and
2.101
Ms Rachel Triggs, General Manager Corporate Affairs and Regulation, Wine Australia spoke favourably about the CPTPP improving market access for wine exporters:
Wine is a highly regulated product, and many of the barriers to trade that we experience across the globe are attributed to technical barriers to trade. So the inclusion of the annex in chapter 8-A, the technical barriers to trade chapter, which is specific to wine and spirits, is highly beneficial to Australian wine producers in addition to the simplified and flexible certification arrangements, including the ability for certificates of origin to be supplied electronically.
2.102
The Minerals Council of Australia submitted that the CPTPP ‘eliminates more than 98 per cent of tariffs among members, including all tariffs on industrial products (manufactured goods).’
2.103
Mr Ash Salardini, Chief Economist at the National Farmers Federation (NFF) similarly endorsed the CPTPP:
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.
2.104
The Perth USAsia Centre noted that the CPTPP will decrease tariffs for members and facilitate a reduction of “red-tape”:
The CPTPP eliminates tariffs on 98 percent of trade between its members, through a series of bilateral market access swaps. Its market access gains are particularly advanced in agriculture and services, two sensitive sectors which are often excluded from other free trade agreements. It also streamlines trade activities by providing a single set of procedures – for rules-of-origin, customs administration, and technical barriers to trade – that facilitate greater cross-border flows of goods. Adding new members would broaden the group of countries participating in this high-standard free trade area.
Issues of concern
2.105
Ms Michele Higelin from ActionAid Australia, alerted the Committee to potential adverse impacts of ISDS provisions for Australia, citing the 2012 Philip Morris case when the company tried to sue the Australian Government for mandating plain packaging on tobacco products, through ISDS provisions:
Even if you look at Australia, we spent $24 million on the Philip Morris case. We only recovered $12 million of that, and we won that case. That's significant revenue, which comes out of public services.
2.106
Dr Patricia Ranald from the Australian Fair Trade and Investment Network (AFTINET) was similarly critical saying with respect to ISDS in the CPTPP that there is:
…danger with the US rejoining is that US companies are the most frequent users of ISDS cases. There are over 1,000 outstanding cases at the moment, and the most frequent users are US companies.
2.107
The Electrical Trades Union of Australia was also opposed to ISDS provisions in their submission, stating ‘[t]he Investor State Dispute Settlement clauses undermine Australian legal sovereignty and must be removed.’
2.108
Mr Sid Marris from the Minerals Council of Australia was supportive of ISDS measures:
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… Building up confidence through agreements like this is vital to ensure that investment comes in and that jobs are sustained and can indeed grow.
2.109
Mr Ash Salardini from the National Farmers Federation (NFF) also advocated for the confidence ISDS measures can provide to investors:
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.
2.110
The Electrical Trades Union of Australia submitted that it had concerns regarding labour market testing requirements, skills testing and verification requirements, and labour rights and human rights provisions. The ETUA stated:
The provisions which have the effect of removing, exempting or diluting Australia’s Labour Market Testing requirements must be removed.
Inadequate skills testing and verification processes have arisen with the CPTPP driving the creation of ambiguous visa classes to satisfy movement of natural persons commitments. The skills assessments being performed are now primarily a paperwork inspection and increases the likelihood of occupational and public health and safety risks resulting in overloading already under-resourced agencies with the task of monitoring occupational compliance and at times skills testing and verification of temporary workers.
The CPTPP should be reformed to include commitments from governments to implement agreed international labour rights and human rights provisions with agreed enforcement mechanisms.
2.111
ActionAid highlighted that that the reduction of trade barriers may harm gender equality in CPTPP member-states as ‘when access to public services decreases, women have to fill the gap and unpaid care burden increases’:
CPTPP rules could undermine women’s access to public services, which are critical for the redistribution of women’s disproportionate unpaid care burden and vital to the realisation of gender equality. Trade tariffs have been a critical source of revenue for low-income countries, meaning that tariff liberalisation agreed within the CPTPP can worsen resourcing gaps in developing countries and further undermine access to public services.
2.112
Dr Ranald from AFTINET, raised concerns about the CPTPP’s lack of consideration for women and recommended:
…that we re-evaluate the CPTPP in the context of COVID-19 to ensure the agreement supports strong response and economic recovery efforts across the region. We also recommend that there be a gender impact assessment of the CPTPP, alongside human rights and environmental impact assessment, in order to identify and redress any gender and broader negative impacts.
2.113
Ms Michelle Higelin, Executive Director at ActionAid Australia recommended that there be an ‘environmental impact assessment’ of the CPTPP ‘to identify and redress any… broader negative impacts.’
2.114
The Electrical Trades Union of Australia called for an environmental assessment of the CPTPP in their submission:
A full, public environmental impact study of the CPTPP should be immediately carried out. The findings must inform the inclusion of a new chapter in the agreement that require governments to commit to implementing international environmental standards.
2.115
In evaluating the CPTPP Dr Patricia Ranald from the Australian Fair Trade and Investment Network noted that ‘the CPTPP has chapters on labour rights and environmental standards’ but expressed concern that ‘those chapters are not as fully enforceable as the rest of the agreement.’
2.116
However, Dr Ranald expressed the view that the existence of these chapters on environmental and labour standards is ‘a positive for that agreement.’
2.117
By way of comparison, Dr Ranald noted that the Regional Comprehensive Economic Partnership (RCEP) ‘doesn't have any chapters on labour rights or environmental sustainability. There are positives and negatives in these different agreements.’