Statement to the Joint Standing Committee on Treaties Inquiry into the Free Trade Agreement between the Government of Australia and the Government of the People’s Republic of China
Opening Statement , E&OE
I thank you very much Chair, yes I would very much like the opportunity to make an opening statement on behalf of the various whole-of-government agencies involved in the China-Australia FTA negotiations. Thank you.
Concluding a highly liberalising trade agreement with our largest trading partner last November, after almost 10 years of negotiations, was a major milestone for Australian trade policy, creating the single largest trade deal Australia has ever achieved. With two-way trade worth over $152 billion, and our exports to China accounting for up to 6% of our GDP, it's hard to overstate the importance of China to the Australian economy. Trade with China has already contributed significantly to our current prosperity – underpinning jobs and boosting our standard of living. This comprehensive agreement is a platform for broadening and deepening the trade and investment relationship into the future. It's a significant component of the Australia-China Comprehensive Strategic Partnership.
It will unlock substantial new access to the world's second largest economy, creating new business and the jobs that go with that.
Taxes on bilateral trade, tariffs, will almost all be removed, most in the first few years, and on 96% of Australia's exports when the agreement is fully implemented. Removing the hundreds of millions of dollars of taxes on this trade will make Australian products more competitive in China, leading to business success and more jobs. Less tax on consumer products and business inputs from China provide direct benefits to Australian families and businesses.
As the committee's already heard, the China free trade agreement will remove significant barriers to Australian agriculture exports across a range of products. Many of your witnesses have already called for early entry-into-force to cement the edge over our competitors without FTAs into China such as the US and the EU, and to catch up with those who already have agreements, such as New Zealand, ASEAN and Chile.
We've just heard from representatives of the dairy industry with the significance of the rapid tariff elimination that has been secured in the agreement for that industry. And we've also heard the details of the much less restrictive safeguards that will apply to Australian exports into China relative to those that continue to exist in the New Zealand agreement. Clearly this has great significance for future investment and jobs in that crucial industry.
Regarding resources and energy, China is by far Australia's largest market, worth over $77 billion in 2014. Under the agreement, China will eliminate all tariffs on these products within four years. Importantly, this includes coal, where our major competitor, Indonesia, enjoys a valuable tariff advantage through ASEAN's FTA with China. The Minerals Council has estimated that eliminating tariffs on minerals and energy exports to China could reduce costs by about $600 million per year – including $380 million for our coal exporters – supporting business and jobs at a time of considerable industry pressure.
Tariffs will also be removed in short timeframes on a range of Australian manufactured goods, including pharmaceutical and health products.
Concerning services, China is already Australia's largest market, worth $8.2 billion in trade in 2014. China has given Australia the best package of services outcomes it has provided to any foreign country, with significant new commitments in many sectors of interest, including financial services, legal and professional services, health and aged care.
Importantly, through a Most-Favoured Nation clause, China has committed to extend to Australia any improved market access it provides to other trade partners in the future in a broad range of services sectors. Similarly, the MFN commitment on investment ensures that Australian investors will obtain the benefit of any future investment commitments China gives to other trade partners.
Australian employers and industries doing business with China have given evidence that goods, services and investment outcomes in the China FTA will help generate activity, jobs, and a strong boost to our relationship in future.
Nevertheless, in the public debate, there have also been concerns raised, including circulation of misinformation about particular aspects of the Agreement.
The government has made some efforts already to respond to these concerns, including the 'myths versus realities' document that I believe has been made available to the committee. I'd like to add a few further comments.
Firstly, the China free trade agreement will not allow unrestricted access to the Australian labour market by Chinese workers. It will not allow Australian employment laws or conditions to be undermined, and it will not allow companies to avoid paying Australian wages by using foreign workers.
Australia's existing visa arrangements, including the 457 program, will continue to be the basis for implementing Australia's commitments on labour mobility under the China FTA.
Secondly, through Investment Facilitation Arrangements made available under a separate MOU concluded alongside the China FTA, Chinese companies making significant investments in Australia of more than $150 million in specific types of infrastructure projects will be able to request to temporarily bring skilled workers in from overseas when local workers cannot be found. These arrangements are designed to encourage inward investment by providing labour certainty in the event of skills shortages – as occurred during the mining boom. Under domestic regulatory arrangements that will operationalise these IFAs – the Department of Immigration and Border Protection's Project Agreements Programme – employers seeking to sponsor an overseas worker under an IFA Project Agreement must demonstrate a labour market need and prove that Australians have been provided first opportunity through labour market testing, which includes providing evidence of significant recruitment efforts.
Thirdly, ChAFTA does not change the required skill levels for Chinese temporary visa applicants in various trades. The publicly-available side letter to the China FTA on this issue brings the process for such Chinese visa applicants into line with that applying to those from 150 other countries. As such, this merely establishes a different administrative pathway - during rather than prior to the visa application process - for these Chinese visa applicants to have their skills, experience and qualifications verified. Upon arrival in Australia, they must still obtain any required Federal, State or Territory licenses or registration to commence work, including workplace health and safety. Claims to the contrary are simply wrong.
Mr Chair we have a note setting out some further information that can be made available to assist the committee in this regard, with your permission. [See separate document: Information Note on Movement of Natural Persons Provisions.]
Fourthly, as the committee is aware, the China FTA contains an investor-state dispute settlement mechanism. ISDS, as it's known, does not protect an investor from a mere loss of profits following a change in government policy or legislation. The FTA's ISDS provisions contain explicit safeguards to protect legitimate government regulation in areas such as public health and the environment.
Finally, the China FTA will not change our existing quarantine and testing processes, which will continue to apply to food imports from all countries. Similarly, there are no changes to restrictions on importing asbestos, as has been claimed, or other dangerous products.
Mr Chairman, Australia and China are working towards entry-into-force, with the cooperation of your committee, of the FTA before the end of this year. For goods with phased tariff elimination entry-into-force this year would deliver the two tariff cuts in quick succession – on entry-into-force and on 1 January 2016. As has been pointed out through many industry submissions this makes a very big difference to many sectors in the Australian economy, many of them regional-based. Mr Chairman, negotiations were a complex undertaking and involved extensive consultations across commonwealth agencies, state Governments, interested exporters and many others – the NIA (the National Interest Assessment), lists over 700 stakeholders engaged and many, many, many meetings as has been testified in earlier evidence. The agencies represented here today are happy to answer further questions.