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:
- 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.
- 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.
- 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.
- Once parliament has endorsed the proposal, negotiations
may begin.
- 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
- 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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