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Statement to the Joint Standing Committee on Treaties' Inquiry into RCEP, 2 August 2021

By James Baxter, First Assistant Secretary, Office of Trade Negotiations, Department of Foreign Affairs and Trade

2 August 2021

Thanks, Chair. What I’d like to do is build on the statement that we made on 10 May, where we talked about the strategic dimension of RCEP and the importance of active Australian participation in RCEP to maximise Australia’s influence in the development of regional economic arrangements, and why it can’t be taken for granted that Australia will always and as of right have the opportunity to participate in such regional arrangements.

But now, if it’s helpful, I’d like to respond briefly to some of the concerns that have been expressed in submissions to, and hearings of, the inquiry.

First, let me address the question of whether Australia should withhold ratification of RCEP because of the situation in Myanmar.

I would note that Australia participates regularly in regional meetings involving all ASEAN members, including RCEP meetings. RCEP and other regional meetings involving ASEAN provide forums within which to discuss a range of regional issues, including our support for regional economic recovery.

While we raise concerns about Myanmar at all appropriate opportunities, we do not assess that withholding Australia’s ratification of RCEP would be in our interest, nor would it have any impact on the political situation on the ground in Myanmar.

We have focused our efforts on more appropriate fora, including bilaterally, in other ASEAN-related settings, and in broader multilateral settings including the United Nations Human Rights Council and General Assembly, the G7, and the International Labour Organisation.

While we have consistently raised our concerns about the situation in Myanmar, and will continue to do so, it’s a fact that Myanmar remains a member of ASEAN. Stepping aside from RCEP, which has ASEAN at its core, would be perceived in our region as walking away from our commitment to ASEAN as a force for regional stability and prosperity, and our support for ASEAN centrality. That would not be in Australia’s interests.

I would also note that Australia’s long-standing policy is to recognise States, not governments. Australia engages with regimes to the extent required by the circumstances of each case.

Secondly, allow me to address concerns that RCEP might unduly constrain Australia’s ability to regulate on important social matters, particularly on aged care.

As we said in our response to a question on notice from the last hearing, there is nothing in the RCEP agreement that would prevent or impair the implementation of any of the recommendations of the Royal Commission into Aged Care Quality and Safety.

A number of submissions have identified two particular provisions of the Trade in Services chapter of the Agreement as potentially constraining the government’s flexibility in this area. These are the provisions on Market Access, and the provisions on Domestic Regulation.

However, the provisions referred to do not operate in the manner suggested in some of the evidence before the Committee. Briefly speaking, the Market Access provisions discipline a narrow range of measures in relation to staffing levels, none of which would be affected by the Royal Commission’s recommendations.

Moreover, all the recommendations of the Royal Commission could be implemented in line with the Domestic Regulation provisions. This is because those provisions explicitly allow for regulation that is needed to ensure the quality of the service – and it is clear that this is precisely what the Royal Commission’s recommendations are aimed at achieving.

Against that background, the way in which Australia has formulated the social services reservation in its Schedule of Reservations and Non-Conforming Measures – a point raised in evidence before the Committee – is irrelevant to the government’s capacity to implement the Royal Commission’s recommendations.

Thirdly, I note concerns have been expressed about whether ratifying RCEP will lead to any economic benefits to Australia, on the basis that there will be no increase in our market access from tariff reductions in RCEP partners.

In response, I’d reiterate that we expect most of the impact of RCEP to be in areas such as market access for services providers and investors, and improvements in governance and the business environment in some of the developing countries in RCEP.

In respect of trade in goods, improved access to regional value chains resulting from RCEP’s rules of origin will also benefit Australia’s exporters of raw materials, including Australian farmers. The regional nature of these rules of origin will make it more attractive for food processors in South East Asian RCEP parties, for example, to source primary produce from Australia compared to sourcing it from competitors in North or Latin America or Europe.

However, all of these areas are difficult to measure, and so are not generally captured through economic modelling.

Finally, regarding concerns about ratifying RCEP on the basis that it doesn’t have commitments on labour rights, I would note that this is not uncommon in trade agreements, and it shouldn’t be a reason not to ratify RCEP. Trade supports Australian jobs and living standards and has lifted many millions around the world out of poverty. RCEP and other free trade agreements help Australia and its FTA partners to benefit from the opportunities that come with openness to trade and investment.

Thank you for the opportunity to make these opening remarks. We’d welcome any questions from you or other members of the Committee.

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