House of Representatives

Customs Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015

Second Reading Speech

Mr Robb (Minister for Trade and Investment)

I move:

That this bill be now read a second time.

In doing so, I am pleased today to introduce the enabling legislation for our landmark China-Australia Free Trade Agreement. This is an outstanding agreement. It is the highest quality and most liberalising trade deal that China, the world's second biggest economy and our largest two-way trading partner, has done with any other developed country. It is by far the best free trade agreement Australia has done with any country from the perspective of goods, services and investment. There is a significant economic imperative to doing everything we can to bring this agreement into force before the end of this year-and I will come to that shortly.

The Customs Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015 amends the Customs Act 1901 to implement Australia's obligations under chapter 3 of the China-Australia Free Trade Agreement (ChAFTA).

Chapter 3 sets out the rules of origin criteria and related documentary requirements for determining the eligibility of goods to obtain preferential tariff entry into Australia under the agreement.

The complementary Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015, will amend the Customs Tariff Act 1995 to set out Australia's tariff commitments under the agreement.

These quite modest bills represent the only legislative amendments that the parliament will need to pass to allow the government to bring ChAFTA into force. There is no need for amendments to any other bills, in particular the migration bills, because there is nothing in the agreement which requires a change to the protections and the standards of work that are required under the current legislation. This puts a lie to many of the actions that we have seen-the misrepresentations, the mistruths and the deliberate scaring of people across the community that has occurred, led by the CFMEU and the ETU, including others. We hope, certainly, that common sense will prevail and that, in due course, we will see a return to the traditional bipartisan position.

We hope we see a return to the traditional bipartisanship on these sorts of trade agreements, which have been so fundamentally important in Australia having 25 years now of uninterrupted economic growth. This will add to that record.

This bill and this agreement are a very important plank in the government's economic program to facilitate job growth and diversity in the economy following the downturn in the mining and resources and energy sector. This is a critical part of the diversification and the increased export of services in a most profound way. Seventy five per cent of our GDP is services at the moment. We export about 17 per cent. The opportunities in China and other parts of Asia are just spectacular, and this agreement, for the first time, opens the door on so many services operations within Australia. We will see dramatic growth. The Financial Services Council alone says that the increased access that will be given to financial services will create another 10,000 jobs between now and 2030 in that sector alone.

This is the sort of outcome that we can expect across so many areas of the Australian economy-driving diversification and putting our economy on sounder foundations; driving other things that we do as well as resources and energy industry activities.

These quite modest bills represent, as I said, the only legislative amendments that would be needed to allow the government to bring this agreement into force.

I had the honour of signing this historic agreement with my Chinese counterpart, Minister of Commerce Dr Gao Hucheng, on 17 June 2015 in Canberra. In close consultation with the government of China, the Australian government is working towards entry into force in 2015 in order to maximise the business gains for both parties.

This requires each of us to successfully conclude our respective domestic processes. As mentioned earlier, we have sought to introduce this legislation, which is central to our domestic process, at the earliest possible opportunity because of the very material additional benefits that will flow to a wide range of industries if the agreement enters into force in 2015.

Scheduled tariff cuts are based on the calendar year, which means entry into force this year will deliver an immediate round of tariff cuts, followed by a second round of cuts on 1 January 2016. This would mean that our exporters would benefit enormously from two rounds of tariff cuts over a three-week period at the end of this year and in early 2016; whereas if entry into force is delayed into next year, for example, they would only get the benefit of one round of cuts for the first 12 months.

A delay would cost Australian business an estimated $600 million. Failure to implement the agreement at all would be a disastrous outcome for business, for job creation and for growth-at a time when we are trying to aid the diversification of our economy in this post-mining-boom period.

Today we see reports of National Farmers' Federation estimates that, if this deal does not proceed, Australian agriculture stands to lose a massive $18 billion over the next decade. The Chinese government will walk away from the agreement if this is blocked in the Senate by the Labor Party.

There is an enormous amount at stake. The future of Australia will be profoundly influenced by whether or not we enter into this agreement that has taken 10 years to negotiate and on which there is so much support and agreement across the community.

CHAFTA has been the subject of an inquiry by the Joint Standing Committee on Treaties, JSCOT, under the excellent chairmanship of the member for Longman. While this legislation is being introduced this week to meet tight parliamentary deadlines, debate on the bill will not continue until after the release of the joint JSCOT report on the Monday of the next sitting week.

CHAFTA builds on agreements already concluded by this government with Korea and Japan. It forms a part of a powerful trifecta of agreements with Australia's three largest export markets, which account for more than 61 per cent of our exports of goods.

It affords Australia unprecedented levels of access to a market of more than 1.35 billion people which includes a rapidly rising middle class. The three agreements lead to access to over 1.5 billion people.

As I said earlier, these three agreements were a very high priority for our government because we, like everyone else, understood that the mining and resources boom was going to come to an end and that the activity and the blessings we have had from that boom over the last 15 years would eventually-as always with resources and energy-come to an end with it. What goes up comes down and we have to drive wider activity in the economy.

This agreement gives us access to 1.5 billion people on a preferred basis-and in the case of Japan and in the case of China, not only a preferred basis but a preferred basis to every other trading nation in the world. We have achieved benefits out of these deals which no-one else has achieved. We have a real opportunity for first mover advantage. We will rue the day if we throw away the opportunities that are sitting in front of us.

Some of our goods are currently subject to tariffs in China of up to 40 per cent. More than 85 per cent of all Australian goods exports will be tariff-free on entry into force. On full implementation 95 per cent of our goods will enter tariff-free.

It will greatly enhance our competitive position in key areas such as agriculture, resources and energy, and manufactured exports, and it will provide unprecedented services access.

Notably, tariffs will be abolished for Australia's $13 billion dairy industry. Australia's beef and sheep farmers will also gain from the abolition of tariffs of from 12 and 25 per cent. All tariffs on Australian horticulture will be eliminated.

By 2030, the total benefits for beef production, for instance, are expected to approach $3.3 billion, while the dairy industry says an agreement will lead to the creation of 600 to 700 new dairy jobs in the first year alone.

David Larkin, the chairman of the Australian Meat Industry Council, accompanied me to China recently as part of a business delegation. He described this agreement as 'the most significant development for Australian agriculture in 200 years'. Tariffs on products such as barley, oats, sorghum and millet, certain wood and paper products, and certain base metal ores and their concentrates will also be eliminated on entry into force of the agreement. Tariffs on coal exports to China will be eliminated within two years of implementation, helping Australian exporters of high-quality coal compete with Indonesian firms, who already benefit from preferential access to China.

The agreement contains simplified and trade facilitative rules of origin and related documentary requirements. Goods imported into Australia that meet the rules of origin, implemented through this bill, will be entitled to claim preferential tariff treatment in accordance with the agreement.

Crucially, Australia has also secured best ever market access provided to a foreign country by China on services, with enormous scope to build on an export market already worth more than $7 billion. Legal services, financial services, education, telecommunication, tourism and travel, construction and engineering, health and age services, mining and extractive industries, manufacturing services, architecture and urban planning, as well as transport, among many others, will all benefit from being able to do business more easily and more competitively in China.

China has also extended most favoured nation treatment to Australia. This is a very important provision. Most favoured nation treatment to Australia means China will extend to Australia any more-beneficial treatment it provides to any other trading partner any time in the future in the following sectors: education, tourism, travel related services, construction, engineering, security services, environmental services, services relating to forestry, computer and related services, and certain scientific and consulting services-things that we are world leaders in. All these things will get preferential treatment-but, not only that, if China gives any better treatment to anyone else we will also get that automatically.

The FTA also contains investment provisions to boost and diversify investment flows between our countries which are critical to Australia. As a nation with thin capital markets, which has always relied on foreign capital, Australia was also afforded most favoured nation status on investment, which means again that we will also benefit from any future concessions that China gives to any other country. China at the moment is negotiating a very significant investment treaty with the United States. If anything comes out of that treaty that is in addition to what we have already been given, we will automatically get that as well any time in the future. This is a high-quality deal. It will not only provide quality but give certainty to business and certainty to investors into Australia to know that whatever other preferences are given we will automatically get them.

Australian households and businesses will also reap the benefits of cheaper goods and components from China, such as vehicles, household goods, electronics and clothing, placing downward pressure on the cost of living and the cost of doing business in Australia. Another key feature of the agreement is a built-in mechanism to allow for further liberalisation and the expansion of market access over time, including a first review mechanism within three years. This places Australia in a strong position to secure additional gains as China undergoes further economic reform into the future.

The amendments also include relevant obligations on Australian exporters and producers who wish to export Australian goods to China under the agreement and obtain preferential treatment for those goods in China. Already, when I went to China three weeks ago with 35 CEOs, there was a whole raft of major agreements being built between Alibaba, and all these massive business-to-consumer and business-to-business online programs. They are building joint ventures with a whole raft of Australian businesses already in anticipation of this bill passing this year.

Already thousands of prospective jobs are starting to come into play and there has been no diminution of worker protection in any of this legislation-none whatsoever. The lies being peddled by the CFMEU and the comfort being given by the Labor government are a total disgrace in this regard. People's lives are at risk and the jobs are at risk. The amendments also confer certain powers on authorised officers to examine records and ask questions of exporters or producers of goods exported to China in order to verify the origin of such goods.

The free trade agreement with China has secured the overwhelming support of Australian business and industry. Daily, for months now, we have seen reports of industry and other organisations, all of whom studied this agreement and feel it is a fundamental part of the future prosperity and growth of this economy. The group so isolated those who are against this. We have seen Bob Hawke and all the luminaries of the Labor Party, including the current leaders at state and territory level and former major industry and trade ministers Simon Crean, former ACTU President, and Martin Ferguson, see the merit of this agreement.

All of these Labor people have said there is no diminution in worker protections or the standards of employment. Therefore, there is nothing standing in the way of the Labor Party supporting this bill. Importantly, the implementation of this agreement will boost the position of Australian businesses against competitors in New Zealand and the Association of Southeast Asian Nations who are already benefiting from preferential access into China.

I would also like to put on record the government's appreciation for the significant levels of support afforded to this agreement, as I said, from the likes of Bob Hawke, Simon Crean, Bob Carr and John Brumby along with Labor premiers, such as Jay Weatherill and Daniel Andrews. They are joined by an ever-growing list of prominent business and industry figures. I would also like to acknowledge former Prime Minister Tony Abbott for the support he provided to me in successfully concluding these negotiations. The rapport and trust that developed between former Prime Minister Tony Abbott and President Xi was fundamental in the success of these agreements. In addition, I would like to thank all those officials and negotiators who worked so diligently and professionally over a very long period of time to help conclude the historic deal. In particular, I think Jan Adams for her leadership.

This agreement represents a high-water mark in Australia's relationship with China. Once implemented, it will create tens of thousands of jobs, over time, for Australians. It will add billions of dollars to our economy. It will improve our living standards. It will grow trust in the region. It will add not only to economic security but also to peace in the region. It is far too important to play politics with. It is a key part of our plan to help capitalise on the enormous opportunities that are emerging in the region around us. I commend these bills to the House.