Background and issues raised
1.1 On
23 August 2018, the Senate referred the provisions of the Customs Amendment
(Comprehensive and Progressive Agreement for Trans-Pacific Partnership
Implementation) Bill 2018 [Provisions] (Customs bill), and the Customs
Tariff Amendment (Comprehensive Agreement for Trans-Pacific Implementation)
Bill 2018 [Provisions] (Customs Tariff bill) to the Legal and
Constitutional Affairs Legislation Committee (the committee) for inquiry and
report by 10 October 2018.[1]
1.2
The Senate Selection of Bills committee recommended that
these bills be referred for inquiry to allow '[f]urther scrutiny by
non-government Senators'.[2]
Background to the bill
1.3
The bills
would amend the Customs Act 1901 (Customs Act) to implement Australia's obligations
under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
(TPP-11). The TPP-11 is an international free trade agreement (FTA) that was signed
by 11 countries, including Australia, on 8 March 2018 in Santiago,
Chile. On introducing the bill, the then Minister for Trade, Tourism and
Investment, the Hon. Steven Ciobo MP, outlined the benefits of the agreement:
The
TPP-11 is one of the most comprehensive trade deals ever concluded and will
eliminate more than 98 per cent of tariffs in a trade zone spanning the
Americas and Asia, with a combined GDP worth $13.7 trillion. Australian
farmers, manufacturers and services exporters will benefit from new market
access opportunities in economies with nearly 500 million consumers.
It
will provide better access for farm exporters including beef and sheep meat
producers, dairy producers, canegrowers and sugar millers, as well as cereal
and grains exporters. There will be new opportunities for our rice growers,
cotton and woolgrowers, horticultural producers and our wine exporters...
Our
manufacturers will benefit from the elimination of tariffs on industrial goods.
Our services exporters will have access to liberalised and improved regulatory
regimes for investment, notably in mining and resources, telecommunications and
financial services.
The
TPP-11 is truly a next-generation trade agreement.
And
for the first time in a trade agreement, TPP-11 countries will guarantee the
free flow of data across borders for services suppliers and investors as part
of their business activity. This 'movement of information' or 'data flow' is
relevant to all kinds of Australian businesses—from a hotel which relies on an
international online reservation system to a telecommunications company
providing data management services to businesses across a number of the TPP-11
markets. It's important to note that TPP-11 governments have retained the
ability to maintain and amend regulations related to data flows, but have
undertaken to do so in a way that does not create barriers to trade.[3]
1.4
According to
the Department of Foreign Affairs and Trade, the TPP-11 is:
...[an FTA]
between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico,
Peru, New Zealand, Singapore and Vietnam...
This
Agreement is a separate treaty that incorporates, by reference, the provisions
of the Trans-Pacific Partnership (TPP) Agreement (signed but not yet in force),
with the exception of a limited set of provisions to be suspended. The 11
countries have a shared vision of the Agreement as a platform that is open to
others to join if they are able to meet its high standards.[4]
1.5
Essentially,
the TPP-11 replicates many of the provisions of the earlier TPP FTA (now
sometimes called TPP-12, to distinguish it from the later TPP-11). There are,
however, significant differences. Most importantly, the TPP-11 does not include
the United States as a member state. Consequentially, it omits some of the
original agreement's provisions, as outlined in the Customs Bill Explanatory
Memorandum.[5]
1.6
Regarding the
opportunities for Australia in being a party to the TPP, DFAT has stated:
The TPP
is a regional free trade agreement of unprecedented scope and ambition with
great potential to drive job-creating growth across the Australian economy.
TPP
outcomes include new market access opportunities for Australian exporters of
goods and services, as well as investors, that are additional to Australia's
existing free trade agreements. For investment, the TPP will create new
opportunities and provide a more predictable and transparent regulatory
environment.
The TPP
will also establish a more seamless trade and investment environment across 12 countries
by setting commonly-agreed rules and promoting transparency of laws and
regulations. The TPP will provide greater certainty for businesses, reduce
costs and red tape and facilitate participation in regional supply chains.
The TPP
addresses contemporary trade challenges in ways that have not previously been
addressed in Australian FTAs, such as commitments on state-owned enterprises,
which will promote competition, trade and investment and enable Australian
exporters to compete on a more level playing field.[6]
Provisions of the bills
1.7
The bills
would make amendments to the Customs Act to implement Australia's commitments as
a signatory to the TPP-11.
1.8
The Customs
bill would introduce new rules of origin for goods imported into Australia from
nations that have entered into the TPP, as well as make provision for
Australian authorities to ensure that Australian exporters meet relevant
country-of-origin rules under the TPP. According to the bill's Explanatory
Memorandum:
The
TPP-11 amendments contained in the Bill will enable eligible goods that satisfy
the new rules of origin to be entered into Australia at preferential rates of
customs duty. The amendments will also impose obligations on exporters of
eligible goods to a Party to the TPP-11 for which a preferential rate of
customs duty is claimed, and on manufacturers who produce such goods.[7]
1.9
The
amendments made by the Customs bill would be complemented by the Customs Tariff
bill, including its provisions:
- providing preferential rates of customs duty, on entry into force
of the TPP‑11, for all goods, excluding excise-equivalent goods, that are
Trans‑Pacific Partnership originating goods determined in accordance with
new Division 1GB of Part VIII of the [Customs Act]...;
- inserting new Schedule 8B to provide for excise-equivalent rates
of duty on certain alcohol, tobacco and fuel products and for phasing rates of
customs duty in accordance with the TPP-11; and
- amending certain concessional items in Schedule 4 to the Customs
Tariff Act to maintain customs duty rates in line with the applicable
concessional item and in accordance with the TPP-11.[8]
Parliamentary scrutiny
of the Trans-Pacific Partnership
1.10
In
introducing the bills, the Minister stated that:
Here
in Australia, this agreement has undergone a level of scrutiny perhaps
unprecedented by any other free trade agreement. It has been subject to four parliamentary
committee inquiries.[9]
1.11
These
parliamentary inquiries have included work undertaken by:
- the Joint Standing
Committee on Treaties, in its inquiry into the Treaty tabled on 9 February
2016 (which lapsed with the dissolution of the Senate and the House of
Representatives on 9 May 2016 and so did not produce a final report);[10]
- the Joint
Standing Committee on Treaties, in its Report 165: Trans-Pacific Partnership
Agreement (tabled 30 November 2016);[11]
- the Senate Foreign
Affairs, Defence and Trade References Committee, in its inquiry into the Proposed
Trans-Pacific Partnership (TPP) Agreement (tabled 7 February 2017);[12] and
- the Joint Standing Committee on Treaties, in its Report 181: Comprehensive and Progressive Agreement for Trans-Pacific Partnership (tabled 22 August 2018).[13]
Financial implications
1.12
The
Explanatory Memoranda for both bills contain the same Financial Impact
Statement, which estimates that implementing the TPP would reduce customs duty
collections by $195 million over the forward estimates, as forecast by the
2016–17 Commonwealth Budget.[14]
1.13
According to
the Explanatory Memoranda these estimates are still current, with the 2018–19
Budget noting that there 'would be no additional costs of implementing the
TPP-11'.[15]
1.14
The Customs
Bill Explanatory Memorandum includes a Regulatory Burden and Cost Estimate,
which suggests that the TPP is expected to reduce compliance costs for
Australian exporters to TPP-11 Parties. This would come from two sources:
First,
the ability of exporters to use one set of documentary procedures to export to
10 other markets instead of under eight separate FTAs plus two non-FTA
partners. Second, the possibility that some businesses that previously sought
and obtained non-preferential certificates of origin (COOs) may now be able to
self-certify the origin of their goods for exports to Brunei Darussalam,
Canada, New Zealand, Mexico, and Vietnam. Existing agreements allow businesses
to self-certify the origin of their goods for exports to Chile, Japan,
Malaysia, Peru and Singapore.[16]
Compatibility with human
rights
1.15
According to the Explanatory Memoranda, the bills are compatible with
the human rights and freedoms recognised or declared in the international
instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
1.16
The Explanatory Memorandum for the Customs bill recognises that it
engages the Right to not be subjected to arbitrary or unlawful interference
with privacy in Article 17 of the International Covenant on Civil and
Political Rights (ICCPR).[17] It concludes that the bill is compatible with human rights, as 'to the extent
that it may engage the right to privacy, [its provisions] will not constitute
an unlawful or arbitrary interference with privacy'.[18]
1.17
Regarding the
Customs Tariff bill, the relevant Explanatory Memorandum states that its
provisions do not raise any human rights issues.[19]
1.18
The Senate
Scrutiny of Bills Committee stated that it had no comment in relation to the
bills.[20]
Regulatory impact
1.19
The Explanatory
Memorandum for the Customs bill contains a Regulation Impact Statement covering
both bills. This outlines the potential risks of Australia not becoming party
to the TPP, should it choose to do so following the withdrawal of the United
States from the agreement on 23 January 2017.[21]
These risks would primarily be missing out on the forecast benefits of the agreement,
including that it is expected to:
- deliver
commercially meaningful market access gains that will benefit Australian
agriculture, resources, energy and manufacturing exporters, service providers,
consumers and investors;
- secure
Australian exporters' competitive position in the Asia-Pacific;
- deliver
faster and deeper market access gains than are possible through multilateral [World
Trade Organisation] negotiations;
- be consistent
with WTO requirements for FTAs, and
- complement
Australia's efforts to seek additional trade liberalisation from other TPP-11
parties through the WTO and regional mechanisms.[22]
Conduct of the inquiry
1.20
Details of
this inquiry were advertised on the committee's website, including a call for submissions to be
received by 10 September 2018. The committee also wrote directly to a number of
individuals and organisations inviting them to make submissions.
1.21
The committee
received 15 submissions, which are listed at Appendix 1. All submissions are
available in full on the committee's website.[23]
Structure of this
report
1.22
This report
consists of two chapters:
- This chapter sets out the background and provisions of the bill, as
well as the administrative details of the inquiry; and
- Chapter 2 outlines the principal issues raised by participants in
the inquiry, and sets out the committee's views and recommendations.
Acknowledgements
1.23
The committee
thanks all organisations and individuals that made submissions to this inquiry.
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