House of Representatives

Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014

Second Reading Speech

Mr Robb (Minister for Trade and Investment)

This Customs Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014 contains amendments to the Customs Tariff Act 1995 that will implement Australia's tariff commitments set out in the Korea-Australia Free Trade Agreement. These amendments are complementary to those contained in the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014. If I could use this opportunity to speak to the two bills that are in front of us here this morning, they are related very much. I am pleased to have this opportunity to conclude the debate on this important agreement.

As many know, Korea is Australia's third largest export market and our fourth largest trading partner. This is a very significant agreement. The Korea-Australia Free Trade Agreement will benefit Australian exporters, importers, workers, consumers and investors by opening markets and freeing trade and investment between Australia and Korea. With now 70 per cent of all the world's export output in goods and services going as inputs into other final products, the global supply chain issues are now of fundamental importance. Sometimes products can end up going across borders five or six times before they end up in a final product. So the ease with which you get customs arrangements, the services that sit around so many of these production processes, and intermediate goods and services have all become more and more important.

It is only 25 years ago that 20 per cent of total world exports went in as inputs into products. It is now 70 per cent. This is now very much a global village as far as business being done, and it is quite critical to get a more seamless process existing across borders, especially between our big trading partners. For so many of the highly sophisticated manufacturing products that Korea is known for, in so many cases Australia is, in a very competitive way, able to sell inputs into those processes and products and are doing so. This agreement will make those transactions more profitable and certainly make Australian manufacturing industry far more competitive in terms of maintaining and growing those sorts of relationships into Korea.

So it is not only important to exporters; it is important to importers as well. We get cheaper imported products into some of our processes. It is important to workers because it creates jobs. It creates, in time, many tens and hundreds of thousands of jobs over time. It is important to consumers as they get cheaper products. It is important to investors, because this agreement provides greater certainty to investors, both ways, by opening up markets and freeing trade investment between our two countries.

With one-in-five Australian jobs linked to trade, this agreement will provide an important boost to Australia's economy. The FTA secures Australia's competitive position in this market, where our competitors, such as the United States and the European Union, are already enjoying preferential access.

There was a huge element of urgency about concluding this agreement from the time that we won office, because some two years ago the European Union and the United States completed comprehensive agreements with Korea of this nature. Every year that went on where we were not in the same position with the same sorts of agreements, our industries were being disadvantaged. For example, in the beef industry, a 40 per cent tariff is applied by Korea against all beef imports. Korea gave, over 15 years, an opportunity for the European beef industry and the United States beef industry to reduce that tariff in a linear fashion-so 2.7 per cent each year, for 15 years-until it was eliminated.

So after two years, Australia's beef industry is at a 5.4 per cent disadvantage. If we were to let it go another year it would be a 8.1 per cent disadvantage against our biggest competitor. This is a half-a-billion-dollar market for our beef industry. We were at the risk, not only in beef but in a whole lot of other areas, for the same principle to apply. We were seeing our competitive position being eroded quite dramatically because we had not, and the previous administration had not sought, to complete this negotiation. In fact, it was, in many respects, the investor-state dispute settlement mechanism which has been in many ways used and abused by certain anti-trade unions. Some unions are very much in favour of trade, but there are some big unions that are anti-trade, and they have used this ISDS and put the weights on their colleagues within the Labor Party, in this parliament, to reject outright an investor-state dispute settlement mechanism.

This ignores the fact that we have, for 30 years now, had 28 investor-state dispute settlement procedures in agreements with 28 countries, and a number of those were implemented when Labor was in power. Most recently, the ASEAN-Australia-New Zealand Free Trade Agreement has an ISDS in it. Well, low and behold, listen to all the speeches we have heard today. Listen to the press releases. Listen to what the subcommittee had to say. The hypocrisy is huge. It is just a political tool to try and stop trade and to put Australia at a disadvantage. Those people have got an agenda which is not related to expanding our trade in growth and in our jobs position. The excuse for railing against this agreement, for holding it up and putting us at a very distinct disadvantage as a country has no grounds whatsoever. In fact, the ISDS provisions in these new agreements provide very strong carve-outs and safeguards for public health and environmental issues. Those opposite know it. They know this but they ignore this fact. Having been complicit in many ISDS provisions in the past, they are now saying it is the devil incarnate. It is just a piece of politics.

The results of the independent modelling that was being conducted show that the FTA will be worth over $5 billion in additional income to Australia between 2015 and 2030, and will result in an annual boost to the economy of around $653 million after 15 years of operation. This ignores the fact that the modelling could not accommodate the services advantages. This agreement is a 21st-century agreement on services. This agreement gives us access in services into a major North Asian country in a way that we have never had before, and it is going to provide enormous opportunity-not just on the goods side, but on the services side also, which I think will be the big growth area. Our economy is 80 per cent services. Our brand in terms of services, in so many areas, is gold standard in the region. The opportunities are enormous as long as we can get access to these markets. This agreement provides, for the first time, very significant access across a very wide range of services and it has been universally applauded by those in the services sector in Australia.

After 15 years of operation of the FTA, it is expected that our exports to Korea will be 25 per cent higher than they otherwise would have been. By 2030, exports of agricultural goods to Korea are expected to be 73 per cent higher than otherwise-a 73 per cent advantage from this agreement. Increased exports under the FTA are expected to create over 1,700 jobs on implementation. The FTA will make a difference at the farm gate, from mango exporters to macadamia nut growers to potato farmers. There is a 300 per cent tariff on potatoes; now, on implementation of this agreement, zero. Farmers will enjoy improved access to the Korean market on so many fronts.

Australia's beef exporters will be big winners, as I have just explained, because we will finally get onto that diminishing tariff line that is enjoyed by the US and the EU. It would have gone another year without settlement if we had not got into office, because the negotiations had totally run into the sand; a deadlock had been reached. Fortunately, we were able to unlock that.

In regards to KAFTA, I note that there was some confusion among those opposite. I really applaud the press release the other day by the Leader of the Opposition, and my counterpart the shadow minister for trade and investment, Senator Wong, where Labor said they will support the legislation and that increased access to Korea is important et cetera. All very noble sentiments, and yet we have got an amendment in front of us which seeks to delay it, renegotiate it, raise a whole lot of issues that Labor have supported in the past, but claim are totally unacceptable today. There is a fair bit of confusion, but hopefully the sensible comments and position announced on Monday by the Leader of the Opposition, and my counterpart, Senator Wong, will prevail. I note the press release of the Leader of the Opposition, and I am grateful for that support of this bill.

As I have said, negotiations commenced back in 2009, and as a government we are fully aware of the imperative of finalising it as soon as possible. We are looking to slow the growth of debt fuelled government spending. That has to stop if we are to put ourselves in a strong position and live within our means. But if we do reduce the rate of growth of government spending, we have to replace it with something. We intend to replace it with strong growth in the private sector. The KAFTA is a very important starting point to promoting growth, trade and investment with one of our major trading partners.

Every day of delay is another day Australia is at a competitive disadvantage against our major competitors, who have already achieved preferential access to this market. The playing field will be levelled through the finalisation of this free trade agreement. Next week I am travelling to Seoul to meet my counterpart in Korea, Mr Yoon Sang-jick, Minister of Trade, Industry and Energy. I will also be meeting other key members of the national assembly responsible for the passage of implementing legislation in Korea. When Australia and Korea have concluded their respective parliamentary processes and other procedures, we can start to benefit from this world-class agreement-hopefully by 1 January 2015.

In conclusion, I would like to pay gratitude to members in the trade division of my department, who have done a remarkably good job on this and other agreements. It has been a very heavy agenda. They have completed the processes in a very efficient manner. The advice and negotiating skills have been world-class. I am very grateful to them and to my office for the work that has been done to bring this about. I have great pleasure in supporting this bill before the House.

The DEPUTY SPEAKER ( Hon. BC Scott ): The original question was that this bill be now read a second time. To this the honourable member for Rankin has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.