I rise today to support the Customs Amendment (Product Specific Rule Modernisation) Bill 2019 but, in so doing, I move:
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House:
(a) that the focus of the Government's trade priorities in the short, medium, and long term should be to diversify Australia's trading relationships in order to balance against further external economic shocks; and
(b) the government's failure to allow the Productivity Commission to conduct independent modelling of bilateral trade agreements prior to ratification; and
(2) calls on the Government to:
(a) proactively engage with the Opposition on trade matters, maintaining bipartisanship in the trade portfolio in the face of increasing global economic uncertainty; and
(b) reaffirm Australia's support for a multilateral trade system, including continuing engagement with international trade institutions such as the World Trade Organisation".
In moving these amendments we're ensuring Australia's commitment to a balanced, practical rules-based system that serves to further Australia's best interests internationally and at home. In line with that and more broadly, Labor supports the bill before the House. The bill amends the Customs Act to streamline the product-specific rules of origin, or PSRs, for six of Australia's free trade agreements, including the Australia-Chile Free Trade Agreement, the Australia-New Zealand Closer Economic Relations Trade Agreement, the Australia-United States Free Trade Agreement, the Korea-Australia Free Trade Agreement, the Malaysia FTA and the Thailand-Australia FTA.
For the benefit of the House, I'll just briefly explain that product-specific rules of origin are an essential component of FTAs and must be met by importers seeking preferential tariff treatment for goods that include materials not originating in the territories covered by an agreement. They're based upon the Harmonised Commodity Description and Coding Systems, well known as the harmonised system, which is an international naming system for the classification of traded products. It currently covers thousands of commodity groups and is used by more than 200 economies as a basis for customs tariffs and the collection of international trade statistics. Due to a revision of the harmonised system, the proposal is to replace individual definitions of a harmonised system with new ones according to each specific free trade agreement. Simply, the amendments aim to simplify the way in which the product-specific-rule annexes in each FTA are implemented domestically. So while this is a fairly technical bill, it speaks to some of the wider issues in the international trading system. Labor supports bills such as this as part of a bipartisan effort to support a rules based order in international trade.
Australians need to see the tangible benefits from these free trade agreements and others to better understand the part they play in the economic advancement of Australia. In that light, it is worth going through some of the details of the trade agreements concerned in this bill. The Australia-Chile FTA entered into force in 2009. It was Australia's fifth agreement and its first with a Latin American country. It included the elimination of almost 92 per cent of tariff lines, covering 90 per cent of merchandise trade. It confirmed the commitment of both countries to liberal services and investment regimes. It also locked in both countries to high standards on intellectual property protection for patents, trademarks, geographical indicators and copyright issues.
The Australia-New Zealand Closer Economic Relations Trade Agreement is one of the most comprehensive bilateral free trade agreements in existence. The agreement came into force in 1983 and covers all trans-Tasman trading goods, including agricultural products, and was the first to include free trade in services. It includes a prohibition on all tariffs and on quantitative import or export restrictions on trade in goods originating in the free trade area of the agreement. It also contains measures to minimise market distortions in trading goods, including through domestic industry assistance and export subsidies and incentives. There was also a harmonisation of trans-Tasman food standards through the Australia New Zealand Food Authority agreement of 1995, which means lower compliance costs for industry, fewer regulatory barriers and more consumer choice.
The Australia-US Free Trade Agreement came into force in 2005 and represented a landmark in improving Australia's trade and investment relationship with the world's largest and richest economy and its most significant merchandise and services exporter and importer. The agreement significantly improved Australia's attractiveness as a destination for US investment—important for our efforts to maintain Australia at the leading edge of growth and competitiveness. I want to recognise the very important direct investment of US companies into Australia, particularly into my state of Western Australia. The investment of Chevron into building the LNG plants across the north-west has been a remarkable boost and of course was part of the construction boom that we saw in recent years. In recent sitting weeks, I was pleased to host in my office the US Chamber of Commerce, along with some Labor colleagues who also attended. I want to acknowledge Mr Patrick Kilbride, Senior Vice-President of the Global Innovation Policy Center of the US Chamber of Commerce, and also Ms Kelly Anderson, the director of policy from the same group.
The Australia-US Free Trade Agreement included provisions where tariffs were reduced—60 per cent of agricultural tariffs went to zero immediately with a further nine per cent dropping to zero in 2008, and the trade in all metals and minerals became duty free upon entry into force. There was also a closer harmonisation of Australian and US intellectual property, which benefits Australian exporters and creates a more familiar and certain legal environment.
The Korea-Australia FTA came into force in 2014. Under that agreement, Australian exporters to Korea gained a competitive edge for their goods exports, with nearly all Korean import taxes on Australian goods being eliminated over time. Australian services exporters also have better access to that market. Under that agreement more than 99 per cent of Australia's goods exports to Korea are eligible to enter duty free or with other preferential access and about 88 per cent of Australia's manufacturing, resources and energy exports have entered into Korea duty free since it came into force. All remaining tariffs will be phased out by 1 January 2023.
The Malaysia free trade agreement came into force in 2013. Under that agreement, Malaysia and Australia cut tariffs on a wider range of goods earlier than was negotiated under the earlier agreement, the ASEAN-Australia-New Zealand Free Trade Agreement. The agreement also addresses other barriers to trade. It makes administration for traders much simpler and there were significant tariff reductions. The agreement has benefited many industries, such as tourism, research and development, and mining related services, and there is also the potential for majority ownership by Australian companies into Malaysian companies.
The Thailand-Australia Free Trade Agreement came into force in 2005 and was focused on eliminating the majority of Thai tariffs on goods imported from Australia and on the reduction of Thailand's previously very high tariff barriers for some goods—tariffs of up to 200 per cent. It's a significant benefit for Australian businesses, opening up a range of export opportunities in South-East Asia's second-largest economy. It was important for many industries, but, in particular, it opened up access for Australian companies to Thailand's services markets, and there was a commitment to liberalise two-way services trade into the future.
It is important to note that trade with Thailand and with Malaysia has increased ever since both of these agreements were made and still far outweighs trade with Indonesia, which is a remarkable fact given the much larger size of the population of Indonesia. It goes some way towards demonstrating how underdone is the relationship between Australia and Indonesia and how important it is for all of us in this place and outside of this place to work very hard on people-to-people and economic ties with great nations such as Indonesia. Despite some reservations, Labor supports the IA-CEPA, which is still to go through the other place, and we look forward to working with our friends and colleagues in Indonesia in the future.
But, for all the benefits that are claimed about trade agreements, we must also be cognisant of the potential costs that can come from open trade, and that is why the Labor Party has called consistently for independent economic modelling of free trade agreements. In fact, it was Labor in government that did the first economic modelling of the IA-CEPA, the Indonesia-Australia Comprehensive Economic Partnership Agreement, when negotiations commenced in 2007. We also welcome the fact that the Department of Foreign Affairs and Trade is now conducting five-year reviews of all free trade agreements. There is an obligation on the government, on Labor as the alternative government and on the business community to ensure the wider community does indeed benefit from open trading relationships with the world and to ensure, as we need to do, that the benefits do outweigh any negative impacts and the concerns of the community about those.
We must only look to our friends and strong allies the US to see what happens when domestic politics weaponise international free trade. Those anxious about the economy and their own very challenging financial and social circumstances were invited to—and they did and continue to—blame global open trade for their struggles. Without an adequate social safety net in the US, who can really blame them for turning to trade as the cause of their quite desperate circumstances?
That's why it is important for a country like Australia to maintain a social safety net—our Medicare system and our Pharmaceutical Benefits Scheme—so that people who are struggling, who have their challenges, are supported by government and by all of those in this House. They must not be made to feel like a target for attack by certain people who like to reprimand, and see as negative, people that are in the social safety net and do depend on it to get by. If we fail to do this, we may find ourselves in the situation that the US is in, where people in circumstances where they are struggling turn the blame straight onto global trade. That would not be in the best interests of Australia.
The international trading system, as we know, has entered a period of extraordinary instability and uncertainty over recent years. That has been compounded by the recent events unfolding between the two largest economies in the world. Every tariff imposition and each trade sanction enforced by these countries against one another continues to rip the fabric of international markets and institutions, and there will be a ripple effect that will only widen in diameter. The failure to appoint further judges to the WTO appellate body is another crushing blow to an international organisation that has benefited Australia greatly since its inception. In 2019, demand for international products has continued to grow, and interconnected global supply chains criss-cross scores of different regions. A conflict of the magnitude that we are seeing between the US and China only serves as a disruptor to a peaceful working order.
Put simply, the international trading system as it stands is under immense pressure. Now, more than ever, Australia must continue to seek out new markets and new agreements—but good-quality agreements that are fair—to diversify against external financial shocks. We must be a model for other nations in our region and around the globe in a clear pursuit of multilateralism over unilateralism. We must continue to show a willingness to engage in a rules based system that is balanced, fair and rewarding for nations that choose to participate.
The build-up of bilateral trade agreements across the globe has been welcome in the sense that nations are willing to participate in the trade process. However, as time has progressed, the proliferation of these nation-to-nation agreements has resulted in significant underlying concerns for the wider trade system. This noodle bowl effect, as it is called, is detrimental to the multilateral approach under which the World Trade Organization operates, and it continues to have counterproductive effects in the promotion of open international trade. This is not to say that there are not benefits from bilateral trade agreements—there clearly are—but the greater gain over the longer term is very much in pursuing true multilateralism. That takes time and that takes patience.
The noodle bowl effect not only allows countries to ignore the existing rules based order but presents multiple layers of complicated process in relation to other international trade agreements, which can be both costly and reductive to global trade priorities. This is a disincentive to multilateralism and only serves to amplify the risk of situations like the US-China trade war. The trade war between China and the US should not and cannot become a foundation for the legitimatisation of aggressive trade disputes between nations. Labor supports action that will reinforce institutions like the WTO in order to provide a balanced, reasonable and arbitrary conciliation process to avoid what we can see unfolding internationally.
In this period of global uncertainty, here at home we have seen the gulf widen between the major parties on a number of domestic issues, but this cannot be allowed to happen when discussing trade, and international trade in particular. Trade should be bipartisan in nature, as all members of parliament have an interest in increasing the prosperity of our great country. According to a recent Lowy Institute survey, 75 per cent of Australians believe that free and open trade has been good for their own standard of living. That's eight points up since the survey of 2017. It's an obligation on us in this House to do better at explaining these benefits.
At this point I'd like to thank the trade minister, Senator Birmingham, for his willingness to engage with me on a number of issues in relation to the trade portfolio and to address them in a very constructive manner. I look forward to being able to continue to work with him in the national interest and with my colleagues, of course, on this side of the House and on the other side of the House.