MONDAY, 14 MARCH 2022
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Thanks for that welcome, it’s a delight to be addressing the Australia-British Chamber of Commerce this morning in Perth, or this afternoon on the east coast.
One of the silver linings of recent years is the comfort with which we can all use platforms like MS Teams or Zoom or Webex, and the possibilities that it opens up for connecting with people in ways that were never before contemplated.
I’ll start with some brief remarks about the UK trading relationship and the Australia-UK Free Trade Agreement, and then I’m hoping to move quite swiftly to a conversational format, because I think that your feedback to me will be valuable and important for me to hear.
Labor is the party of free, fair and open trade. Labor knows trade diversification is key to the future prosperity of this country.
But we need to grow the products we sell, not just the markets we sell them to.
WA’s Chief Scientist Peter Klinken recently outlined how Australia’s relative economic complexity is declining. We are now ranked #86 between Paraguay and Uzbekistan.
Australia has a rich history of Trade and foreign investment with the United Kingdom.
We of course know now that our First Nations Australians have traded internationally for thousands of years.
But the UK is certainly our oldest trading partner of the modern era.
Like many other Australians, I have British heritage. Indeed, until early 2016, I too was a British citizen. My dad moved over here in the early 1950s and was one of the first employees of the British Petroleum Kwinana Oil Refinery, sadly now closed. This investment from a British company in our country and in my state of Western Australia built the town of Kwinana and the suburbs of Medina and Calista, in which I was born and which I am now very lucky to represent in this place.
These days the UK-Australia Trade relationship is worth over $30 billion. And that’s only going to grow as Brexit forces the UK to seek new markets – or reinvigorate old friendships, as in this case.
The Indo-Pacific is the fastest growing region in the world, and it’s on our doorstep. Over recent decades, Australia has acknowledged that it is economically tied with our Asian neighbours.
However, the rise of ecommerce and digital trade – turbo-charged by COVID-19 – has meant that Australia’s geography is less of a barrier to trade with UK and broader Europe than it once was. In this context, following the decision by the United Kingdom to exit the European Union, it was clear that bilateral trade agreements were to be pursued as a matter of priority.
Indeed, having not negotiated a trade deal since the 1970s, I understand the UK Government sought advice and expertise of Australian trade negotiators to get the ball rolling on these processes.
The process of the Australia-UK free trade agreement has not been without problems. I was very concerned, for example, that I, my office and the general public learnt more about the direction of the negotiations from the UK Government than we did from our own. And I sincerely thank the British High Commissioner Vicki Treadell and former High Commissioner Menna Rawlings for the open and collaborative dialogue.
I was alarmed by the lack of transparency displayed by the Morrison Government, and what impact this secretive approach has had on the outcomes of this agreement – which we’ve only had a chance to look at after it’s been signed.
I am concerned that in the Morrison Government’s haste to secure a deal, it has negotiated away some of the protections that we in Labor believe are crucial for any workable international agreement.
I’ve expressed concern, for example, about the procurement provision, particularly as they relate to state and territory and local government entities. I also think that issues around movement of people and mutual recognition of qualifications need to be examined thoroughly.
Labor has previously expressed concerns about the unwarranted waiving of labour market testing in relation to international recruitment. This FTA not only waives labour market testing, but also allows unlimited numbers of temporary workers to come from the UK. And vice versa of course, which may be of some concern to job seekers in the UK.
I’ve also drawn attention to the particular challenges facing Australian wine exporters. Given the hits Australian wine exporters have already faced with smoke taint from bushfires, tariffs and trade sanctions from China, and increased shipping rates due to the global shipping crunch – they simply do not need this.
While tariffs are lowered for Australian wine exporters in the Australia-UK FTA, the UK Government looks set to increase domestic taxes on wines, which will have a disproportional impact on Australian wines. The proposed new UK wine tax will be charged by alcohol percentage.
More than one-third of Australian wine exports are sold to the UK, making it Australia’s number one export market.
In May 2021, the International Wines and Spirits Record estimated the value of Australian wine sold in the UK in the past year to be £2 billion – or $3.8 billion Australian dollars. But exporters are concerned that the UK’s proposed duty changes would create a system that is simply unworkable.
That’s because the proposed duties significantly favour some countries over others. Currently any alcoholic beverages - including wine - are taxed based on their concentration of alcohol by volume (ABV). Under the new regime, wine and sparkling wine between 8.5 per cent ABV and 22 per cent ABV would be taxed at £25.88/litre pure alcohol.
Wine Australia claims this would result in a significant increase in the duties payable on still wine above 11.5% ABV.
97% of still wine exported from Australia has an ABV of more than 11.5%. In fact, the average alcohol concentration of Australian wines imported to the UK in the last year was 13.2%.
Australian wines are naturally higher in alcohol than European wines because of our sunnier and drier climate, so this will put them at a competitive disadvantage.
On top of this, the alcohol content of wine is heavily influenced by the seasonal conditions. Under the proposed duty regime, the duty rate in one vintage year is likely to vary from the next – meaning a logistical nightmare for exporters in terms of tax rates and labelling requirements.
If implemented, these duty changes will mean an estimated, debilitating 11% tax increase on Australian wine exports to the UK.
Worse still, recent Senate Estimates hearings revealed that Australian Government negotiators knew that the UK was looking to increase its taxes on Aussie red wine at least a month before the trade agreement was signed. Yet it was full steam ahead for the Morrison Government, despite being aware that the new domestic tax system will hurt Australian wine growers significantly more than the tariff reduction would help.
Finally, I have concerns on process. It is only right that Australians and their elected representatives are able to scrutinise some of the other changes posed by this trade agreement around Australian professional standards, open migration and government procurement.
Labor respects the convention introduced by former Foreign Minister Alexander Downer in 1996, which sets out the process for proper scrutiny of trade agreements by the parliamentary Joint Standing Committee on Treaties. The convention provides that the JSCOT inquiry be held across no less than 20 joint Senate and House sitting days
Because the Government scheduled so few sitting days in the first half of this year, we will only have two joint sitting days before the inquiry lapses when the House is dissolved for the upcoming election.
To be clear, Labor does not oppose the UK FTA in principle, but Mr Tehan’s suggestion that the Parliament should wave the agreement through without the normal scrutiny processes rings alarm bells.
Despite the fact that there are some clear wins for Australia in the FTA, it’s hard not to read the Dan Tehan’s hurried approach through the lens of a dying Government desperately trying to create a legacy at the eleventh hour.
The trade agreement currently being negotiated with India must be read through the same lens. There have been a number of hints dropped (mostly in the Indian press) that an ‘early harvest’ trade agreement with India will be signed in coming days and weeks.
India is a democracy of 1.4 billion people, just across the Indian Ocean from Australia. We would be foolish not to prioritise the development of a trading relationship with this vital and burgeoning market.
A few years ago, the Government commissioned former head of the Department of Foreign Affairs and Trade, Peter Varghese, to report on ways to improve Australia’s economic relations with India. In 2018 he handed down his report, which contained 90 recommendations, of which the Government has implemented one. Their heart hasn’t really been in it, and it shows.
Things like language and cultural training, which are vital for healthy business relations but not as headline grabbing as a trade deal. Or improving our education relationship, by supporting Australian universities to partner with Indian institutions to teach skills and professions to Indian students. But just as Mr Morrison abandoned the university sector during the pandemic, he’s leaving them to go it alone in India.
Nevertheless, it is disappointing that the Morrison Government has neglected both the Varghese report and the hard work required to actually develop our economic relationship with India.
So when Mr Tehan turns up to a ceremonial signing of a free trade agreement (interim or otherwise) with India, he will likely herald it as historic, legacy making and economically transformative. It would be a fine thing for Australia (and India) if he were right. But Australians will be well within their rights to ask what the Morrison Government is settling for, just so it can have a photo op at a minute to midnight before the election.
To conclude, my key message to you today is not that the Australia-UK FTA would be in jeopardy under an Albanese Labor Government, but rather that Labor is committed to restoring orderly process to scrutiny of trade agreements and their passage through the parliamentary processes – just as the British Parliament is applying its own orderly scrutiny processes to the Australia-UK free trade agreement.