Labor’s Penny Wong has written a solid article in The Guardian explaining why Australia should be wary of so-called “free trade” deals, following the signing of the Korea-Australia Free Trade Agreement (KAFTA):
…when the Abbott government finally released all 1,800-plus pages of the proposed free trade agreement with South Korea this week, its attitude seemed to be “just trust us”…
Labor will examine KAFTA to ensure it is in Australia’s national interest. The tests we will apply are straight-forward…
Does the agreement deliver the best deal for Australian jobs? Is the promised access to Korea’s markets real? Will it erode Australia’s ability to legislate over domestic policy issues in the national interest?..
Central to Wong’s concern about KAFTA is the inclusion of so-called investor-state dispute settlement (ISDS) provisions:
The government has agreed to Korea’s push to include an investor-state dispute settlement mechanism in the agreement. This would allow Korean businesses to take disputes with the Australian government to arbitration. Labor is concerned at the impact of investor-state dispute settlement provisions on Australia’s ability to legislate in areas such as health policy, environmental standards and social policy…
The onus is on the government to demonstrate how policies such as the Pharmaceutical Benefits Scheme, an important part of Australia’s social safety net, are protected by these provisions.
Wong is correct to be wary of ISDS provisions. As I have warned previously, ISDS provisions give authority to major corporations to challenge laws made by governments in the national interest in international courts of arbitration. So effectively, Korean companies could be allowed to sue the Australian Government under international law – a move that is currently being pursued by Philip Morris against Australia on plain packaging and graphic warnings for cigarettes, under an obscure agreement with Hong Kong signed many years ago. It’s a big risk to Australia’s sovereignty and could undermine the Government’s ability to set public policy in the national interest.
Wong has also questioned the purported benefits to Australian agricultural exporters under KAFTA, given many products have been carved-out of the agreement or are subject to stringent safeguards:
…the trade minister Andrew Robb was eager to talk up Korea’s agreement to phase out its tariffs of between 40 and 72% on Australian beef over 15 years…
[But] Liberal backbencher Sharman Stone, who represents the Victorian farming electorate of Murray, has criticised the agreement for failing to deliver tariff reductions for a raft of Australian food exports…
[And] in the fine print, Robb has given the Korean government the right to unilaterally reimpose significant tariffs on Australian beef if the volume of our exports grows by only 2% a year, and he has conceded similar “safeguard measures” for other Australian farm exports…
Unfortunately, such carve-outs and safeguards are not uncommon in FTAs. The Australia-US FTA, which the Howard Government signed for political reasons (rather than real economic benefit), saw large chunks of agriculture carved-out, along with draconian price-based safeguards protecting US horticulture (see Annex 3A).
Penny Wong concludes:
Labor is determined to ensure that the Abbott government does not trade away the national interest for its own political interest in notching up “trophy” trade deals.
It’s good to see such a position taken by Labor, which seems intent to look through the spin and ensure that FTAs do not create negative longer-term consequences for Australia.
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