Background
4.1
This Chapter covers evidence relating to the Regional Comprehensive Economic Partnership Agreement’s (RCEP) trade in services and temporary movement of natural persons provisions.
Services
4.2
RCEP’s Chapter on Trade in Services (Chapter 8) contains a standard set of World Trade Organization (WTO) provisions applying to trade in services, including:
ensuring that each Party’s treatment of service suppliers from another Party is the same as those applied to its own service suppliers;
ensuring that each Party grants the same market access to service suppliers based in another Party as it does to its own service suppliers, including limits on the number of suppliers, the value of the service transactions, the number of persons employed, the type of legal entity or the scale of foreign ownership; and
providing service suppliers from another RCEP Party the same access available to service suppliers from a non-RCEP country, if that access is better than that provided for in RCEP.
4.3
RCEP permits Parties to limit the extent to which these provisions apply:
under Article 8.7, Parties may identify in Annex II of RCEP, specific commitments in relation to National Treatment and Market Access in specific service sectors;
under Article 8.8, the National Treatment, Market Access and Most-Favoured Nation Treatment provisions do not apply to non-conforming measures a Party has identified in List A of Annex III of RCEP; and
under Article 8.8, the National Treatment, Market Access and Most-Favoured Nation Treatment provisions do not apply to any measure a Party adopts or maintains in relation to sectors set out in List B of Annex III of RCEP.
4.4
In general, Chapter 8 of RCEP was well received by inquiry participants. The Chief Minister of the Australian Capital Territory (ACT) highlighted that RCEP would be especially beneficial to a service-based economy such as the ACT’s:
A large number of our exporters can benefit from RCEP's obligation provisions to provide equal and fair access to foreign service suppliers; and its commitment provisions to enhance transparency and predictability to domestic regulation affecting trade in services. Many Canberrans also provide professional services abroad, and they would benefit from RCEP's disciplines addressing 'behind-the-border' barriers to professional-service practice.
4.5
A similar view was expressed by Article Three, who identified the commitments made by RCEP Parties to liberalise services and investment:
Trade in services and investment across the region is still hampered by high barriers relative to goods trade, particularly in some industries in China and some ASEAN economies. RCEP’s inclusion of binding commitments to liberalisation for both services and investment help to address this by ‘locking in’ incremental improvements on WTO [World Trade Organization] and existing regional agreements.
4.6
Nevertheless, the provisions in Chapter 8 of RCEP concerning the Government’s capacity to regulate in the public interest, particularly in relation to aged care, turned out to be the most significant issue raised during the inquiry.
Aged care
4.7
Aged care in Australia is regulated and mainly funded by the Australian Government, with most aged care providers being privately owned organisations run as commercial businesses.
4.8
In February 2021, the Royal Commission into Aged Care Quality and Safety delivered its Final Report: Care, Dignity and Respect which recommended extensive reforms to aged care in Australia. The Royal Commission recommended that the Australian Government continue to fund and regulate aged care, in particular, commissioning and funding providers.
4.9
Inquiry participants were concerned about the potential impact RCEP might have on the Government’s ability to implement the proposed reforms.
4.10
Two specific concerns were raised:
an improvement in qualified staff and staffing ratios in aged care could be contrary to particular provisions in Chapter 8 of RCEP; and
aged care was not specifically identified by Australia as a sector exempt from the application of Chapter 8 of RCEP in List B of Annex III.
Staffing
4.11
One of the matters the Royal Commission identified as requiring improvement was staffing of aged care. In particular, the Final Report found:
A sufficient, committed and high quality workforce is one of the main factors affecting the quality and safety of aged care …
Staff ratios should be introduced to ensure that there are sufficient nursing and other care workers present at all times in residential aged care.
4.12
Concerns about RCEP’s potential impact on staff qualifications and staffing ratios in aged care are based on Articles 8.5 and 8.15 of RCEP.
4.13
Article 8.5 deals specifically with Market Access and states that the Government shall not adopt or maintain:
… limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service …
4.14
Article 8.15 concerns Domestic Regulation, and provides the following:
With a view to ensuring that measures relating to qualification requirements and procedures, technical standards, and licensing requirements do not constitute unnecessary barriers to trade in services, while recognising the right to regulate and to introduce new regulations on the supply of services in order to meet its policy objectives, each Party shall endeavour to ensure that any such measures that it adopts or maintains are:
(a) based on objective and transparent criteria, such as competence and the ability to supply the service;
(b) not more burdensome than necessary to ensure the quality of the service …
4.15
Dr Pat Ranald from the Australian Fair Trade and Investment Network (AFTINET), expressed the view that:
… both of these clauses will restrict the implementation of the royal commission recommendations.
4.16
Mr James Baxter from the Department of Foreign Affairs and Trade (DFAT) pointed out that Article 8.5 concerns ‘imposing limits’ in the sense of constraining the number of staff, rather than obliging the employment of more staff:
It is the silent on the question of any measure relating to, for example, the staff-to-patient ratio. Because it is silent, there is no limitation on the government's right to implement a requirement consistent with that provision for staff-to-patient ratios in aged-care facilities.
4.17
In relation to Article 8.15, Mr Baxter identified that the Article states that Parties have ‘the right to regulate and to introduce new regulations on the supply of services in order to meet its policy objectives,’ and he confirmed that:
… all the recommendations of the royal commission will be implemented in line with the domestic regulation provisions
… it's very clear that this provision preserves the right to regulate and, indeed, to introduce new regulations on the supply of services in order to meet policy objectives.
Inclusion in List B of Annex III of RCEP
4.18
As discussed above, Article 8.8 of RCEP provides that the National Treatment, Market Access and Most-Favoured Nation Treatment provisions do not apply to any measure a Party adopts or maintains in relation to sectors set out in List B of Annex III. Australia has identified a number of service sectors that are reserved from these obligations, permitting changes in the regulation of these sectors.
4.19
Sectors that are reserved from these obligations include:
income security or insurance;
social security or insurance;
4.20
While the list includes health and social welfare, it does not directly identify aged care.
4.21
According to AFTINET, the United Nations Central Product Classification system, which is used by the WTO and in trade agreements, has a separate classification for aged care, which implies that, without a specific reservation by Australia, aged care would be subject to the RCEP provisions which prohibit adversely modifying service sector regulation.
4.22
According to the Australian Nurses and Midwifery Association NSW:
This means that, at worst, aged care is exposed to RCEP, or at best, there is sufficient ambiguity to allow overseas companies to exploit loopholes.
4.23
In relation to these concerns, Mr Baxter told the Committee the ‘right to regulate and to introduce new regulations on the supply of services in order to meet its policy objectives’ contained in Article 8.15 meant that:
… the way in which Australia has formulated the social services reservation in its schedule of reservations for nonconforming measures … is irrelevant to the government's capacity to implement the royal commission's recommendations.
4.24
While not necessary according to DFAT, if Australia had to rely on its reservations in List B of Annex III, Mr Baxter confirmed it could do so:
… we do not accept the suggestion that there is any vulnerability created by the way we have formulated our essential services reservation in this area. In other words, even if we were required to rely on it, we would be fully entitled to do so … The reference, for example, to the UN CPC [United Nations Central Product Classification] codes is not relevant to the interpretation of Australia’s reservations under the RCEP agreement, and that would be clear from a plain reading of the text …
4.25
Notwithstanding the assurances provided in relation to Australia’s capacity to regulate in the national interest with respect to aged care, there was no clear explanation as to why Australia made a specific reservation under List B of Annex III with respect to child care but not for aged care. It is understandable that such inconsistencies give rise to public concern, and it would be better if they were avoided.
Temporary movement of natural persons
4.26
Chapter 9 of RCEP (Temporary Movement of Natural Persons) permits:
… the temporary entry of natural persons of another Party into the territory of the Party, where such persons are engaged in trade in goods, the supply of services, or the conduct of investment …
Each Party shall set out in its Schedule in Annex IV (Schedules of Specific Commitments on Temporary Movement of Natural Persons) its commitments for the temporary entry into and temporary stay in its territory of natural persons of another Party covered by Article 9.2 (Scope) …
4.28
The persons identified in Australia’s Schedule in Annex IV as being permitted temporary entry includes:
Contractual service suppliers (including Independent Professionals or Specialists) … being natural persons with trade, technical or professional skills and experience who are assessed as having the necessary qualifications, skills and work experience accepted as meeting the domestic standard in Australia for their nominated occupation …
4.29
Temporary entry of contractual service suppliers has been a persistent concern for trade unions in Australia. The Australian Council of Trade Unions (ACTU) and Electrical Trades Union (ETU) underlined the importance of labour market testing, regulation and skills testing as tools for protecting Australia’s domestic workforce in relation to contractual service suppliers.
4.30
The ACTU noted that, while some use of contractual service suppliers should be permitted to meet critical short-term skill needs, there should be a proper, rigorous process and that employers should always prioritise the employment of Australians first. The ACTU identified that the trend towards temporary-sponsored migration outsources decisions on migration intake to employers, to the sacrifice of national interest and Australia’s economic long-term vision.
4.31
In relation to contractual service suppliers needing to meet domestic standards in Australia for their nominated occupation, the ETU called for a review of Australia’s skills assessments and the capacity of licencing bodies and regulators. It also recommended the reinstallation of the Trade Recognition Services function of Trades Recognition Australia.
4.32
Concerns were raised regarding harmonised recognition of qualifications, particularly trade qualifications. DFAT confirmed during a public hearing on 10 May 2021 that:
There is nothing in RCEP that goes near requiring governments to harmonise qualifications or even to recognise qualifications from other RCEP economies.
4.33
The RCEP provisions allowing for the temporary entry of contractual service suppliers do not represent any change for Australia over existing trade agreements with RCEP Parties. DFAT stated that RCEP contained no articles that provide new or additional pathways for temporary skilled labour.
4.34
DFAT further asserted that:
Australia is not waiving labour market testing for contractual service suppliers and is not making any new commitments on labour market testing exemptions beyond existing commitments in AANZFTA [ASEAN-Australia-New Zealand Free Trade Agreement] and GATS [General Agreement on Trade in Services].