Agreement to Amend the Singapore-Australia Free Trade Agreement (Canberra, 13 October 2016)
Background
2.1
The Singapore-Australia Free Trade Agreement (SAFTA) was first ratified in 2003. Article 3 of Chapter 17 of SAFTA obliges the parties to review the terms of SAFTA once every two years. The treaty action under consideration here - the Agreement to Amend the Singapore-Australia Free Trade Agreement (the proposed Agreement) - is the result of the third review of SAFTA.
2.2
SAFTA was Australia’s second bilateral free trade agreement. According to the National Interest Analysis (NIA), in its current form it is a broad and comprehensive free trade agreement.
2.3
Singapore and Australia have a close economic relationship. According to the NIA:
In 2014-15, two-way trade was valued at $28 billion. Singapore was Australia’s 5th largest two-way trading partner. Australia exported $4.1 billion of services to Singapore in 2015, with professional, technical and other business services making up the largest share (at 41 per cent).
2.4
Australian goods have had tariff free entry into Singapore since 2003. The proposed Agreement focusses on incorporating services and regulatory provisions from recent free trade agreements, such as the Trans Pacific Partnership Agreement (TPP), while making minor updates to older provisions.
Specific provisions
2.5
A number of specific provisions in the proposed Agreement attracted the attention of submitters. These will be considered here.
Services
2.6
The service provisions were the most contentious during the inquiry. In particular, provisions in the proposed Agreement relating to Singapore’s recognition of legal qualifications and university qualifications.
2.7
While Singapore has a liberal approach to the free trade of goods, it is less open in relation to market access for skilled professionals from other countries, particularly in the fields of medicine and law.
2.8
The proposed Agreement contains, amongst others, the following service provisions:
a framework will be established for the mutual recognition of professional qualification; and
Singapore will permit Australian legal professionals to practice Singapore law and work in international arbitration in Singapore. Singapore will also recognise the legal qualifications of ten Australian universities.
Market for legal services
2.9
The Australian Government stated that:
Singapore took full advantage of some of the flexibility that they retained under the existing agreement—for example, in relation to qualifying foreign law practices.
2.10
The proposed Agreement includes a number of concessions by Singapore that will open the market for legal services to Australian legal practitioners.
2.11
Under Annex 4 I(b), Singapore will permit Australian legal professionals to practice Singaporean law through a Joint Law Venture or a Formal Law Alliance with a Singapore law practice:
…only to the extent allowed by the laws, rules, and regulations concerning Joint Law Ventures and Formal Law Alliances, and subject to the conditions and requirements relating to Joint Law Ventures and Formal Law Alliances.
2.12
Singapore has agreed to modify these laws and rules so that:
the minimum number of Australian lawyers resident in Singapore which the Australian law practice is required to maintain in a Joint Law Venture or a Formal Law Alliance is reduced from 5 to 3;
the minimum relevant legal expertise and experience in the permitted areas of legal practice required of the 3 Australian lawyers shall be considered on an aggregate basis of 15 years for all 3 Australian lawyers, rather than on the basis of 5 years for each Australian lawyer.
2.13
Notwithstanding this, the Law Council of Australia’s submission to the inquiry notes that under Annex 4 II(b) of the proposed Agreement, Singapore:
…reserves the right to adopt or maintain any measure in relation to the licensing of law practices and registration of representative offices, and the registration, admission and qualification of persons who are seeking to supply or are supplying legal services, including the recognition of educational and professional qualifications for the purposes of such registration, admission, and qualification subject to the specific commitments undertaken by Singapore in Singapore’s entry for legal services in Singapore’s Schedule to Annex 4-I.
2.14
The Law Council is concerned that this provides Singapore with an opportunity to impose barriers to Australians wishing to practice law in Singapore.
2.15
In particular, the Law Council notes that:
Singapore currently relies on this reservation to restrict applications for Qualifying Foreign Law Practice (QFLP) licences. QFLP licences allow foreign firms to offer foreign law legal services as well as Singapore law related legal services in “permitted areas of practice”. At the time of making this submission, the Singapore Ministry of Law advises that “[t]he QFLP scheme is not open for application currently and there are no details available regarding further rounds of application.”
2.16
The Australian Government responded to this concern during the public hearing on 19 June 2017:
…Our understanding and our reading of what we have negotiated is that we are in a better position now in relation to qualifying foreign law practices than we were. If, once this agreement has entered into force, Australian law firms and lawyers in Singapore continue to have problems that they think are inconsistent with this agreement, we would be very happy to talk to them about it.
I think that [Annex 4 II] is subject to Singapore's commitment in [Annex 4 I]. In that … it makes clear that Singapore will consider applications from Australians for qualifying foreign law practices.
Recognition of law degrees
2.18
Annex 4 III contains a list of ten Australian universities the law qualifications of which are recognised by Singapore. The Annex also contains a commitment by Singapore to review this list using a mechanism established in Article 7 of Chapter 17 of the proposed Agreement.
2.19
A number of Australian universities offer law degrees but are not part of the ten recognised by Singapore. This issue was a matter of contention during the inquiry. For example, in its submission, Adelaide University states that:
The Adelaide Law School however remains an anomalous omission from the list of recognised providers of law degrees. The Adelaide Law School is the only Group of Eight Law School not included in the SAFTA list (despite having made a number of requests to be included in the list) and seeks an opportunity to be included in any future revisions of the SAFTA list.
2.20
In relation to extending Singapore’s recognition of Australian law qualifications, the Australian Government advises that:
… Domestic Singaporean policy [is] going in the other direction. For example, Singapore recently removed eight British universities from its list of recognised law degrees because the UK did not have an FTA to protect its access. The United States does have an FTA with Singapore, but Singapore only recognises law degrees from four US universities.
Recognition of university qualifications generally
2.21
Universities Australia argues that while the proposed Agreement is an improvement over SAFTA, Universities Australia would like to see recognition extended to the whole of the Australian university sector.
2.22
The submission points out that:
…these initiatives potentially provide Australian universities with a real advantage when attracting Singaporean students to our world-class institutions. Furthermore, mutual recognition of qualifications will facilitate greater workforce mobility between our regions, helping to meet workforce needs and promoting even stronger ties between our nations. Universities Australia looks forward to further progress being made in this space.
2.23
In relation to this issue, the Australian Government states:
I want to make clear that Australia did seek recognition for all of our degrees from all Australian universities under the Australian Qualifications Framework. But, against the backdrop of Singapore's policy going in the other direction, the outcomes we achieved were as far as Singapore would go. We accepted these outcomes in view of input from stakeholders.
Technical regulations and sanitary and phytosanitary measures
2.24
Technical regulations and sanitary and phytosanitary measures in the proposed Agreement will change those currently in SAFTA to ‘…enhance transparency, and promote greater regulatory coherence.’ These changes:
…do not mandate specific requirements or standards for these products. Australia’s ability to set requirements and standards, including for testing and certification will not be affected.
Alcohol labelling
2.25
A submission prepared by Paula O’Brien, Dr Deborah Gleeson, Professor Robin Room, and Claire Wilkinson discussed the changes to alcohol labelling provisions in the proposed Agreement.
2.26
International trade regulation of public health warnings on products was first negotiated in the Agreement on Technical Barriers to Trade (the TBT Agreement).
2.27
The TBT Agreement applies consistent international standards for ‘technical regulations’ and to make sure technical regulations are not used as a barrier to trade.
2.28
A mandatory public health warning label scheme introduced by a government would be considered a technical regulation. Permitting regulations such as public health warning labels is known as the ‘public health exemption.’
TPP and Amendment to SAFTA
2.29
Chapter 8 and Annex 8A of the TPP contains a new approach to public health labelling for alcohol. It allows exporters of wine and spirits to apply government mandated labelling on supplementary labels.
2.30
The focus of Chapter 8 of the TPP is on greater regulatory cooperation and simplification of production for exporters. The TPP text requires that parties allow wine and spirit importers to place country specific labelling information on a supplementary label.
2.31
This new approach is included in the proposed Agreement.
2.32
In the view of Paula O’Brien et al:
Our analysis suggests that the new rules negotiated in the TPP potentially create some challenges, though probably not insurmountable ones, for countries wishing to introduce new labelling regimes to display health information on alcohol containers.
2.33
The biggest concern of the submitters is that:
…whatever the technical terms of the supplementary labelling rule, it is possible that the industry sees it as an implied agreement by government not to burden industry with more labelling requirements. From a public health perspective, it is essential that the supplementary labelling rules not be interpreted in this manner.
Investor State Dispute Settlement (ISDS)
2.34
ISDS is intended to permit a law based approach to resolving disputes between countries and foreign investors.
2.35
The ISDS provisions in the proposed Agreement were raised in a number of submissions.
2.36
According to the NIA, the ISDS mechanism in the proposed Agreement amends the SAFTA ISDS provisions to reflect specific safeguards permitting governments to:
regulate on health and the environment in the public interest;
make it clear that non-discriminatory action to protect public welfare does not constitute expropriation; and
establish that government action which may be inconsistent with an investor's expectations does not constitute a breach of the minimum standard of treatment obligation.
2.37
The NIA argues that the new provisions will ensure ISDS cannot be used in relation to: tobacco control measures; the Pharmaceutical Benefits Scheme, Medicare Benefits Scheme, Therapeutic Goods Administration and Office of the Gene Technology Regulator; Indigenous traditional cultural expressions and other cultural heritage; and foreign investment policy, including decisions of the Foreign Investment Review Board (FIRB).
2.38
A number of tobacco company submissions have raised concerns about the new provisions. For example, the Tobacco Association of Singapore states:
…this will be the first international agreement in force in which a legal industry will be singled out and excluded from the scope of ISDS.
2.39
The submission points out the provision sets a precedent of excluding specific legal industries from the ISDS provisions in bi-lateral free trade agreements. The submission notes that, while there is a specific history in relation to the tobacco industry, the precedent may permit such exclusions where there is no sound reason for doing so.
2.40
Taking a different view, the Australian Fair Trade and Investment Network (AFTINET) points out that while Australia won a recent ISDS case brought by a tobacco company in relation to Australian plain packaging legislation using the Hong Kong–Australia Investment Agreement, it did so by successfully arguing that the tobacco company was not a Hong Kong based company.
2.41
AFTINET argues that the substantive issue of whether plain packaging of tobacco products constituted indirect expropriation was not dealt with in the case. In other words, claims that ISDS provisions will not harm domestic efforts to impose heath regulations are therefore not entirely justified.
2.42
AFTINET argues that despite the additional specific provisions in the proposed Agreement preventing ISDS claims when governments regulate in the public interest, the safeguards may not be sufficiently adequate to prevent future ISDS claims.
Temporary entry of skilled workers
2.43
In relation to the temporary entry of skilled workers, both Australia and Singapore will now guarantee access and provide certainty over lengths of stay for executives, contractual service providers, intra-corporate transferees, and specialist installers and servicers of machinery from either country.
Both Australia and Singapore have agreed to waive labour market testing for installers and servicers, investors/independent executives and contractual service suppliers.
2.45
This commitment will be implemented through the existing 457 visa program.
2.46
The Australian Government stated that:
… on temporary entry, … this was a request of Australia's in this negotiation which reflected feedback from Australian businesses operating in Singapore and seeking to operate in Singapore. As a result of the requests that we have made, Singapore has given Australia the best treatment it has ever given any trading partner in an FTA in relation to business mobility. What that means is guaranteed new access and enhanced certainty regarding length of stay. Australian business persons will benefit, in particular, from Singapore establishing a specific Australian help desk in their government department and streamlining visa processes for our intra-corporate transferees.
2.47
According to the Australian Government:
These outcomes were achieved largely on the basis of reciprocity.
2.48
In relation to the application of the proposed Agreement to the reforms of the 457 visa program announced by the Australian Government in April 2017:
The government has made clear that the recent reforms to the 457 visa program will be implemented in a manner consistent with Australia's international trade commitments, including waivers of labour market testing where applicable. This includes SAFTA, which has been signed but has not yet entered into force.
Government procurement
2.49
According to the NIA, the proposed Agreement contains changes to government procurement to reflect the practice in each country. For Australia this means that federal indigenous procurement policies, small and medium enterprises, government advertising and research and development will not be open to Singaporean business. Australian businesses will have access to services not previously available, including the Public Utilities Board.
2.50
AFTINET argues that government procurement provisions in free trade agreements should follow the example of those adopted on South Korea and the United States, and recognise the value of supporting local firms in government contracting provisions.
2.51
On 1 March 2017, the Australian Government introduced a number of amendments to the Commonwealth Procurement Rules, including specifically a new clause 10.30 which states:
In addition to the considerations at paragraph 4.4, for procurements above $4 million, Commonwealth officials are required to consider the economic benefit of the procurement to the Australian economy.
2.52
The new Procurement Rules were recently considered by the Joint Select Committee on Government Procurement, which reported that:
The Committee supports the introduction of the revised Commonwealth Procurement Rules. It believes that, implemented effectively, the new clauses will enable a broader, more accurate consideration of value-for-money in procurement decision making which may result in savings for the Australian Government and provide important support to Australian industry and the economy.
2.53
The AFTINET submission argues that the provisions of the proposed Agreement are not consistent with these new guidelines.
Other provisions
2.54
The proposed amendment to SAFTA also contains a number of other notable new provisions.
Investment
2.55
In relation to investment, investors from one of the parties will no longer be obliged to include persons of a certain nationality in senior management provisions in investments in the other party.
2.56
In relation to foreign investment in Australia:
…the threshold at which private foreign investments in non-sensitive sectors are considered by FIRB will increase to $1,094 million. Thresholds of $15 million and $55 million will apply to investments in agricultural land and agribusiness respectively. FIRB will continue to examine all investment by Government-controlled entities.
Financial services
2.57
Amendments to the financial services aspects of SAFTA will include a prohibition on discrimination against financial service suppliers from either party; and a removal of obligations relating to the nationality of those holding senior management positions in financial service suppliers.
Telecommunications
2.58
Under the proposed Agreement, telecommunication companies will be subject to fewer barriers and will be able to access telecommunications networks on transparent, fair and reasonable terms.
Service suppliers
2.59
Australian and Singaporean businesses seeking to trade using e-commerce will no longer be required to use service suppliers or data centres in either country.
Rules of origin
2.60
The proposed Agreement contains a new approach to rules of origin. For a producer to identify a country of origin for a product, it will only be necessary to show a change in the tariff classification of the product in that country.
2.61
Previously, producers had to prove that 50 per cent of the cost of producing a product was expended in a particular country for it to be the country of origin.
Conclusion
2.62
In the Committee’s view, the proposed Agreement will amend SAFTA to include some of the most useful aspects of the TPP, in particular the improved protection for government regulation on public interest grounds.
2.63
The Committee would have liked to see better outcomes in relation to the recognition of Australian university qualifications and professions, but the Committee recognises that in an environment where Singapore is becoming more protectionist in relation to services, the outcomes were a significant achievement.
2.64
The Committee is particularly happy that the Australian Government appears to have successfully negotiated for discussion about recognition of Australian qualifications to continue, and hopes that those institutions and professionals who are seeking recognition from the Singapore Government are successful.
2.65
In relation to government procurement, the Committee notes that the Government is currently considering its response to the Report of the Joint Select Committee on Government Procurement.
2.66
The Committee recommends the proposed Agreement be ratified.
2.67
The Committee supports the Agreement to Amend the Singapore-Australia Free Trade Agreement, and recommends that binding treaty action be taken.