Column in The Australian - Determination Needed to Seal the Deals on Trad

Published in The Weekend Australian on 12.10.13 

Within a year the Abbott government hopes to have inked trade deals with China, Japan, Korea and the 11 other members of the Trans-Pacific Partnership. Announcing a planned completion date is the easy part. Here’s what Australia would need to do to seal the deals.

Abbott has indicated his willingness to consider a pared-down agreement with China. Almost two years ago the Gillard government proposed to China that a pared-down agreement could form a foundation to be built upon over time. China responded positively. Under the so-called mini-package, Australia would gain the same access to China’s food market as New Zealand enjoys from its 2008 trade deal with China. Top priority for China in the mini-package is an increase in the size of its investments in Australia that would be exempt from screening by the Foreign Investment Review Board.

Concerned about Chinese purchases of Australian agricultural land, Abbott and Barnaby Joyce have advocated a reduction in the screening threshold for private investment from $248 million to just $15 million. It was confirmed as Coalition policy at Abbott’s campaign launch just a few weeks ago.

With China insisting the Australian government raise the foreign investment screening threshold and the Australian government insisting on lowering it, no free-trade deal with China is possible without a change of heart by one or both countries.

Japan and Australia are close to completing a deal. Most issues are settled. Japan has shown flexibility on several issues of sensitivity to both countries. But ahead of the upper house elections in July, the Japanese government was unwilling to improve market access for Australian chilled beef. Understandably, the Australian beef industry strongly urged the Gillard government not to agree to any deal that excluded chilled beef.

Japan expects a lift in the Foreign Investment Review Board screening threshold to the $1 billion the Howard government gave to the United States in the Australia-US free-trade agreement. China would not see the funny side of Australia granting Japan’s request while rebuffing its own.

If Japan makes a commercially meaningful offer on chilled beef and the Abbott government abandons its policy of reducing the screening threshold and raises it to $1 billion, the free-trade deal with Japan could be settled quickly.

Korea is more problematic. It is insisting on its private companies being able to sue the Australian government for introducing regulations that adversely affect the value of their property or income streams. The Howard government refused to include these investor-state dispute settlement provisions in the US deal, agreeing instead to lift the foreign investment threshold to $1 billion.

Korea is demanding both the $1 billion threshold and investor-state dispute settlement, emphatically telling Australia there will be no deal without them. China’s government would be doubly unamused if the Australian government granted the Korean demands but refused to extend them to China.

Investor-state dispute settlement is also an obstacle to Australia’s participation in any final Trans-Pacific Partnership Agreement. Based on Productivity Commission advice, the Gillard government decided that foreign companies whose governments are party to new trade deals should not be able to take the Australian government to international arbitration, as is happening right now to the Canadian government over Quebec’s attempted regulation of shale gas exploration. Yes, the investor-state provisions apply to state and local government regulations too.

Philip Morris is already using an old investment agreement between Australia and Hong Kong to take investor-state dispute settlement action against the Australian government over its plain packaging laws. The company has signalled its desire to pursue Australia through the Trans-Pacific Partnership Agreement.

The Coalition government has said it will assess demands for including investor-state provisions in future trade deals on a case-by-case basis. In reality, if it agrees to one country’s demands it will have to agree to all.

It was pleasing that APEC leaders refused in Bali this week to give up on the long-running global trade talks, urging the delivery of a substantial down-payment of a final deal at a trade ministers’ meeting in December. The Gillard government pioneered these ‘new pathways’ of breaking up the Doha negotiations into their constituent parts and bringing them to finality separately.

None of these constraints on trade negotiations is news to business and community groups, which have been briefed on them. If anyone in the Abbott cabinet can make progress on the various deals, without surrendering Australia’s sovereignty to private corporations, trade minister Andrew Robb can. He’s spent most of his adult life fighting the Fortress Australia lunacy of rural economic nationalists who want to be able to export food but block food imports and foreign investment in agriculture. Let’s hope he wins.