Opening statement to the Joint Standing Committee on Treaties (JSCOT) Inquiry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11)
Mr George Mina, First Assistant Secretary, Office of Trade Negotiations, Department of Foreign Affairs and Trade
7 May 2018
Thank you very much, Chair, for giving us the opportunity to make this opening statement on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, TPP-11. The TPP-11 was signed in Santiago, Chile on 8 March by Australia's Trade, Tourism and Investment Minister, the Honourable Steven Ciobo MP, together with his counterparts from Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.
The journey to this point in time has been a long one. TPP negotiations were formally launched in 2010. After five years of intensive negotiations, the deal was struck in Atlanta, the United States of America, on 5 October 2015. The original TPP was signed on 4 February 2016 and tabled in parliament on 9 February 2016. JSCOT's report recommending that this deal be ratified was tabled on 28 November 2016, and the government's response to the recommendations in that report was tabled on 6 July 2017. The US withdrawal from the TPP, which followed in January 2017, was extremely disappointing not just for Australia but for all TPP signatories.
The decision of 11 of the 12 parties to return to the negotiating table in order to preserve the original deal was a courageous step. The achievement of a final deal earlier this year was an extraordinary success for Australian trade policy and for global trade reform. The TPP-11 represents the world's most significant trade and investment agreement in more than two decades. The TPP-11 treaty is, above all, a statement of conviction that our fast-growing part of the world should play a leadership role in charting out rules to guide economic governance. Signing an agreement of this magnitude is also timely, as the rules-based international trading system is undergoing a period of stress. The TPP enshrines openness, engagement and respect for the rules underwriting global trade.
To preserve the substantial benefits the TPP offers for Australian businesses, it was vital that the high standards and integrity of the original deal, which JSCOT has already studied in detail, were maintained in the TPP-11 agreement. Australia played a key role in achieving this historic outcome. TPP-11 parties opted simply to suspend a small number of provisions, which reflects the changes in the overall balance of the deal following the withdrawal of the United States.
In its revised form, the legal undertakings framed in the TPP-11 will break down some of the most persistent barriers to deliver opportunities for our businesses to enter new markets, shape new standards for TPP-11 governments to facilitate trade and investment and address commercial challenges in the digital era and provide shared rules for the TPP-11 community on transparency, environment, labour, state-owned enterprises and anticorruption, encouraging SMEs to participate more actively in trade and investment in our region.
Importantly, TPP-11 members were able to agree to maintain the carefully balanced market access commitments made under the original deal in their entirety. That means that Australia's offers on goods, services, investment, government procurement and the movement of natural persons remained unchanged, and, in return, we have been able to preserve the TPP's important and hard-fought gains for our exporters and investors, sustaining jobs and economic growth in Australia.
In 2017, the reputable Peterson Institute for International Economics assessed the implications of TPP-11 for participating economies. The study found that the TPP-11 would increase Australia's income by half a per cent of our national income by 2030, which, of course, represents several billion dollars in new income. This would be a permanent boost to Australia's prosperity. Other studies have provided results of a similar order of magnitude. This contribution to Australia's prosperity, job creation, business growth and economic confidence was not something the Government was prepared to turn its back on.
With the elimination of 98 per cent of tariffs, the TPP-11 tariff cuts will have a cost-saving impact on imported goods for Australian households and businesses, and deliver material gains for our exports. The TPP-11 will provide preferential access for more than $5.5 billion of Australia's dutiable agricultural exports into existing markets as well as new markets, such as Canada and Mexico, working to expand opportunities for industries such as beef, dairy, sugar, rice, grains, seafood, horticulture and wine. The deal will afford new levels of market access for iron and steel products, ships, pharmaceuticals, machinery, paper and auto parts, to name but a few products.
Australian services exporters also stand to reap significant benefits from this deal. The deal delivers Australia's education sector new opportunities for expansion into growing economies, with increasing demands for quality education services. It also includes rules and commitments that support cross-border operations of the financial services sector, one of the most dynamic sectors, of course, of Australia's economy. Australian suppliers of mining equipment, technology and associated services have guaranteed access for the mining and energy exploration efforts across the TPP, where the latest data shows around 45 per cent of worldwide exploration budgets reside.
Private health and allied services companies will benefit from greater clarity about access and operating conditions in Malaysia, Mexico, Vietnam, and, importantly under TPP-11, professional services suppliers will have improved transparency and predictability when operating in these overseas markets. The agreement makes substantial new inroads in improving the ability of Australian service suppliers, professionals and workers to engage with and operate in overseas markets.
In the TPP temporary entry outcomes, some of our most important service industries, such as mining, professional, financial and education services, have unprecedented new access provided to operate in new TPP-11 markets. This opens up opportunities for Australian service exporters to some of the most dynamic economies of our region. Amongst the fast-growing economies, whose appetite for world-class services like those of our services exports are only expected to grow.
Indeed, as indicated in submissions to this committee, the Business Council of Australia has stated that TPP-11 will have a positive effect on the services trade, citing the decreased barriers in professional, mining, technology, transportation, education and telecommunications services. The Minerals Council of Australia has echoed that sentiment, stating that the TPP-11 agreement will provide improved access for mining services, an area where Australia has world-leading expertise.
TPP-11 also has modern and robust rules that address the emerging challenges of the digital era. For the first time in a trade agreement, TPP-11 countries will guarantee the free flow of data across borders for service suppliers and investors, as part of their business activity. This will provide certainty to businesses as they look to optimise investment decisions overseas.
The scope of this deal and its level of ambition cannot be underestimated. It adds breadth and value to the existing free trade agreement network that Australia has with eight of the TPP-11 parties and provides a response to those concerned by the so-called 'noodle bowl' effect of overlapping multiple trade agreements. The TPP's approach to the rules-of-origin question, especially in relation to accumulation, reflects how global value chains are working today and how they will continue to evolve into the future.
By further liberalising foreign investment in Australia, this agreement will also contribute to Australia's prosperity. Foreign investment helps our country to reach its economic potential, through the financing of new and existing industries, which boosts employment opportunities for Australian workers. The investment chapter in TPP-11 provides a carefully negotiated balance and represents a high-water mark in investment facilitation. The investor-state dispute settlement mechanism offers important additional protections that allow Australian businesses to invest overseas with greater confidence while guaranteeing the Australian government will be able to continue regulating in the public interest.
Given the significant contribution TPP-11 will make to our trading future, it is important for Australia to be part of the first group of TPP-11 parties to ratify this agreement. Sixty days after six of the 11 signatories have ratified the agreement, TPP-11 will enter into force for those six countries. It is important that Australia be able to participate in TPP-11 as soon as it enters into force, otherwise we will be at a significant competitive disadvantage as our competitors obtain more-favourable access into TPP-11 markets than we would enjoy. To illustrate this, if Australia were not one of these first six countries, Australian agricultural businesses would face significant losses. Australian red meat businesses would miss out on the reduction of beef tariffs when exporting to Japan and Mexico, for instance. Dairy businesses would not be able to promptly gain preferential quota access into the highly protected Canadian market. Winemakers would not be able to reap the benefits of immediately eliminated tariffs when exporting to Canada, a country to which our exports were valued at over $180 million in 2016-17.
TPP-11 represents a major down payment on regional economic integration. The core promise of this agreement lies in its potential to draw the region together under a common architecture based on strong and transparent rules, fair and open competition and non-discriminatory regulations.
With its membership representing 13.5 per cent of the global economy, we hope that TPP-11 becomes the nucleus of our long-term efforts to expand this economic architecture throughout the Indo-Pacific region. Thank you for the opportunity to make these opening remarks. We commend TPP-11 and its associated national-interest assessment to this committee for its consideration.