Dissenting report by the Australian Greens

Dissenting report by the Australian Greens

1.1        The Australian Greens are not opposed to trade agreements that open up markets for our agricultural producers and other sectors. However we have concerns about a number of issues in the Korea Australia Free Trade Agreement (KAFTA) and on balance we do not believe the agreement is in Australia's national interest.  

1.2        The Australian Greens provided a dissenting report on the Joint Standing Committee on Treaties' (JSCOT) report into KAFTA.[1] None of the evidence presented before this committee has given us pause to reconsider this position. If anything it has provided further evidence in support of our position.

Investor-State Dispute Settlement

1.3        The Australian Greens are in favour of trade and investment flows between countries that constitute ‘fair trade.’ However we strongly oppose the inclusion of Investor-State Dispute Settlement (ISDS) clauses in modern trade agreements which grant foreign corporations the right to sue sovereign governments if they feel changes to policy or legislation negatively impact on their profits.

1.4        The majority report provides a comprehensive summary of the issues arising from the inclusion of ISDS clauses in KAFTA.

1.5        The government and the Department of Foreign Affairs and Trade (DFAT) continue to maintain that there are appropriate safeguards which exempt certain areas from being exposed to ISDS litigation such as legislation relating to health and the environment.  A number of submissions and witnesses to this inquiry have indicated that this is not the case. In fact in comparison to the Canada-Korea Free Trade Agreement, Australia's ISDS provisions are weaker and more susceptible to successful litigation.

1.6        After so many years of successive governments refusing to allow their inclusion, accepting a trade deal that includes ISDS is a dangerous precedent for Australia going into the finalisation of the multilateral Trans-Pacific Partnership (TPP) agreement.

1.7        To put the dangers of including ISDS clauses in perspective, evidence has been provided by DFAT that the reason the KAFTA deal was finally completed after four years of negotiation was because, unlike the previous government, this government was willing to include ISDS in the agreement.[2] 

1.8        The Greens believe Minister Robb is prepared to trade away our national sovereignty by allowing ISDS to be used as a negotiating tool in the negotiation of current and future deals.

1.9        The Greens also note that Australia is currently being sued by the tobacco company Philip Morris through an ISDS clause in an investment agreement Australia has with Hong Kong. The government and DFAT claim that there are safeguards built into the agreement that would ensure ISDS clauses couldn't be used in KAFTA as they are currently being used by Phillip Morris.

1.10      The Regulation Impact Statement (RIS) that assesses the agreement states in relation to ISDS concerns:

Substantive carve-outs and safeguards have been included for key public policy concerns including public welfare, health, culture and the environment.[3]

1.11      The committee has accepted this evidence from the RIS without question despite the advice of experts in submissions and during the hearings of various committees. For example, Dr Kyla Tienhaara stated:

The government has tried to calm concerns about ISDS and KAFTA by pointing to the existence of so-called safeguards or exemptions, as they have been referred to this morning, in the agreement. I would like to stress to this committee the point that dangerous loopholes in the text of KAFTA remain despite the government's efforts to preserve the right to regulate under the agreement.[4]

1.12      This government and particularly the current Minister for Trade and Investment (the minister) has so far been misleading or demonstrated very little understanding of the issues surrounding ISDS in trade and investment agreements.

1.13      Following the signing of KAFTA, the minister stated regarding ISDS:

In the Korean Free Trade Agreement that I've just concluded, we did insist on explicit safeguards to ensure that regulation or law that's passed in public interest areas, such as health and the environment, cannot be covered by this ISDS... you could not have the plain packaging exercise repeated there because it has been essentially carved out those areas of public policy interests, especially to do with health and the environment.[5]

1.14      This assertion was disputed during hearings convened by the Senate Foreign Affairs, Defence and Trade (FADT) Legislation Committee on the Trade and Foreign Investment (Protecting the Public Interest) Bill 2014. Professor Luke Nottage, when asked whether the ISDS clause in KAFTA would preclude a Phillip Morris type case occurring again responded:

The answer is no under the current wording. If that sort of claim by tobacco companies is a particular concern, the obvious way to preclude it completely is to have a carve-out for measures in relation to tobacco.[6]

1.15      As outlined in the majority report there are a number of risks inherent in including ISDS clauses. The Australian Greens believe these risks are too great to allow ISDS to be included in KAFTA or future trade deals. Recently the Greens introduced a bill into the Senate to have such clauses banned from all future trade deals. Unfortunately the government and Labor members of the FADT Legislation Committee recommended that parliament vote down this legislation.[7]

Intellectual property

1.16      The majority report provides a summary of the opposition to the intellectual property provisions in KAFTA. However it is disappointing that instead of recommending the government remove or renegotiate the intellectual property section in this agreement the committee has chosen to among other suggestions call for future intellectual property provisions to be subject to cost-benefit analysis. While this is a sensible recommendation the committee and the public should be aware that over the past five years parliamentary committees, the Productivity Commission, IP Australia and the ongoing Competition Policy Review have all asserted the importance of cost-benefit analysis for trade agreements and IP with no shift in government policy under Labor or Liberal-National governments.   

1.17      The majority report fails to recognise or even comment on these previous reports. Examples from previous reports include:

The Government should ensure that future trade negotiations are based on a sound and strategic economic understanding of the costs and benefits to Australia and the world and of the impacts of current and proposed IP provisions, both for Australia and other parties to the negotiations.[8]

IP provisions should only be included in cases where a rigorous economic analysis shows that the provisions would likely generate overall net benefits for the agreement partners.[9]

1.18      In the last few weeks the Competition Policy Review draft report has been released adding its voice to the concern about intellectual property in trade agreements. It recommends that:

Trade negotiations should be informed by an independent and transparent analysis of the costs and benefits to Australia of any proposed IP provisions. Such an analysis should be undertaken and published before negotiations are concluded.[10]

1.19      The Regulation Impact Statement (RIS) and the National Interest Analysis (NIA) which accompany the KAFTA text provide no comment on the impact of the IP chapter in this trade agreement on the broader public interest in terms of access to knowledge and information.

Automotive industry

1.20      The majority report fails to acknowledge the controversy about the impact of KAFTA on the automotive industry.  In February 2014 Toyota announced that from the end of 2017 the company would stop producing cars in Australia. It stated that amongst other factors: 

with one of the most open and fragmented automotive markets in the world and increased competitiveness due to current and future Free Trade Agreements, it is not viable to continue building cars in Australia.[11]

1.21      In relation to the complete closure of Australia’s automotive industry, public commentary was suggesting that the Korean trade deal would be a game changer before it was signed by this government.[12] It appears from evidence presented to the committee that DFAT and the government ignored, or were discounting, the role played by trade agreements in the decline of the car industry.

1.22      There is no evidence that the government assessed the risk to the car industry of signing KAFTA either prior to or after the agreement was signed. The majority report makes no comment on the fact that the government amended the original modelling to reflect costs to the car industry, but only following the Toyota announcement. This amended data, rather than the original modelling, was provided only after an Order for Production of Documents motion passed by the Senate. The Greens discovered it wasn’t the original modelling done by the government and then the Senate had to pass another Order for Production of Documents to gain access to the original modelling. Clearly potential risks and costs to the car industry by signing KAFTA were not considered or included in the original analysis by the government. The Greens are cynical of the attempts to 'play catch up' in the government’s later analysis.

1.23      It is not clear which modelling was used to assess the impact of KAFTA on the automotive industry or which modelling was used in the RIS or NIA. The assessment process should not be allowed to be repeated in this way.

1.24      It was disappointing that the NIA also made no real attempt to outline the potential and real risks and costs to the Australian automotive sector when signing KAFTA. In answering questions in hearings, DFAT seemed to suggest that potential access to lower cost imported cars (under a lowering of tariffs) was an acceptable trade off to the potential loss of our automotive sector.  This classical “input-output” approach to both the modelling and ideology that drives our trade deals ignores important value judgements that should be debated in our community and parliament, not just determined by the government and politics of the day. The Greens feel more scrutiny and transparency around the decisions that are made during trade negotiations is necessary before we will ever achieve ‘fair trade’ outcomes in these deals.

Previous parliamentary inquiries

1.25      It is disappointing that just like the JSCOT majority report into the KAFTA, the FADT Committee has missed an opportunity to take a strong position on this trade agreement by opposing it.

1.26      Successive JSCOT and FADT reports have made recommendations for improved cost-benefit analysis and a better process for assessing trade agreements both before the agreements have been signed by the government and once the agreements have begun operation. Unfortunately successive governments have not heeded these recommendations and they remain unacted upon. A selection of strong recommendations from various parliamentary committees is provided below.

Foreign Affairs, Defence and Trade References Committee - Voting on trade - The General Agreement on Trade in Services and an Australia-US Free Trade Agreement Treaties and the parliamentary process -  27 November 2003

Recommendation 2

The Committee recommends that the government introduce legislation to implement the following process for parliamentary scrutiny and endorsement of proposed trade treaties:

  1. Prior to making offers for further market liberalisation under any WTO Agreements, or commencing negotiations for bilateral or regional free trade agreements, the government shall table in both Houses of Parliament a document setting out its priorities and objectives, including comprehensive information about the economic, regional, social, cultural, regulatory and environmental impacts which are expected to arise.
  2. These documents shall be referred to the Joint Standing Committee on Foreign Affairs, Defence and Trade for examination by public hearing and report to the Parliament within 90 days.
  3. Both Houses of Parliament will then consider the report of the Joint Standing Committee on Foreign Affairs, Defence and Trade, and then vote on whether to endorse the government's proposal or not.
  4. Once parliament has endorsed the proposal, negotiations may begin.
  5. Once the negotiation process is complete, the government shall then table in parliament a package including the proposed treaty together with any legislation required to implement the treaty domestically
  6. The treaty and the implementing legislation are then voted on as a package, in an up or down vote, i.e. i.e. on the basis that the package is either accepted or rejected in its entirety.

Joint Standing Committee on Treaties Inquiry into the Australia – United States Free Trade Agreement - Tabled 8 March 2004

Recommendation 1

To enable the Australian Parliament to assess the economic impact of the AUSFTA, the Committee recommends that a review of its implementation be conducted by the Productivity Commission five years after the Agreement enters into force.

Recommendation 22

The Committee recommends that the Government undertake a review of the environmental impact of the Agreement and that legislation be introduced which will ensure that all future free trade agreements contain results of an environmental impact assessment prior to final agreement.

Joint Standing Committee on Treaties Inquiry into the Chile – Australia Free Trade Agreement – Treaty Tabled 17 June 2008

Recommendation 3

The Committee recommends that, prior to commencing negotiations for bilateral or regional trade agreements, the Government table in Parliament a document setting out its priorities and objectives. The document should include independent assessments of the costs and benefits. Such assessments should consider the economic regional, social, cultural, regulatory and environmental impacts which are expected to arise.

Recommendation 4

The Committee recommends that the Department of Foreign Affairs and Trade undertake and publish a review of the operation of the Australia – Chile Free Trade Agreement no later than two years after its commencement in order to assess the ongoing relevance of concerns expressed about the Agreement, such as the maintenance of sanitary and phytosanitary measures, impact on the horticulture industries, intellectual property, 457 visas, and labour and environmental standards.

Joint Standing Committee on Treaties Inquiry into the Agreement Establishing the Association of Southeast Asian Nations-Australia-New Zealand Free Trade – Treaty Tabled 16 March 2009

Recommendation 4

The Committee recommends that the Department of Foreign Affairs and Trade prepare a report for the Committee examining mechanisms to allow negotiators to directly consult with industry representatives during the negotiation process.

Recommendation 5

The Committee recommends that the Australian Government include consideration of environment protection, protection of human rights and labour standards in all future negotiation mandates for free trade agreements.

Joint Standing Committee on Treaties Inquiry into the Malaysia-Australia Free Trade Agreement – Treaty Tabled on 14 August 2012

Recommendation 1

That prior to commencing negotiations for a new agreement, the Government table in Parliament a document setting out its priorities and objectives including independent analysis of the anticipated costs and benefits of the agreement. Such analysis should be reflected in the National Interest Analysis accompanying the treaty text.

Recommendation 2

That after 24 months of the treaty coming into effect, an independent review of MAFTA be conducted to assess actual outcomes of the treaty against the claimed benefits and potential negative consequences noted in this report. The review should consider the economic, regional, social, cultural, regulatory, labour and environmental impacts. Such a review should serve as a model for future free trade agreements.

1.27      It is clear from the above examples that parliamentary committees providing sensible recommendations to government is an ongoing pursuit. However successive governments have failed to act on these. Therefore the Australian Greens believe that as KAFTA is not in the national interest it should be voted down by parliament to send a strong message that the trade negotiation and review arrangements require urgent reform by the government.

Conclusion

1.28      KAFTA is not in the national interest. The inclusion of Investor-State Dispute Resolution clauses, intellectual property sections without proper analysis and an ongoing flawed trade negotiation and analysis process has led the Australian Greens to the decision to vote against the trade agreement.

Recommendation 1

1.29      That the Senate refuse to pass KAFTA enabling legislation until Investor-State Dispute Resolution clauses are removed from the agreement.

Recommendation 2

1.30      That the Parliament refuses to pass KAFTA enabling legislation until an independent cost-benefit analysis of the intellectual property provisions in KAFTA has been carried out and has been appropriately assessed by Parliament.

Senator Peter Whish-Wilson

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