SENATOR THE HON PENNY WONG

LEADER OF THE OPPOSITION IN THE SENATE

SHADOW MINISTER FOR TRADE AND INVESTMENT

SENATOR FOR SOUTH AUSTRALIA

SPEECH

7 June 2016

EXPORT COUNCIL OF AUSTRALIA – AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY TRADE FORUM – SYDNEY

TOPICS: JOBS, TRADE

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[ACKNOWLEDGEMENTS OMITTED]

Labor supports trade and investment because it drives economic growth and create jobs.

Trade has underpinned the living standards of Australians since the arrival of the first Europeans.

The jobs of the future – and the living standards of future generations – will also be underpinned by Australia’s trade performance.

We need the right policy settings to fully realise the export potential of our services industries, manufacturers, farmers and food processors.

As the Australian economy transitions out of the mining boom, we need to encourage alternative sources of growth and jobs.

Lifting – and diversifying – our export performance is an important part of this strategy.

LIBERAL SLOGANS AND DEFICITS

The Liberals’ approach to trade policy has been like its approach to so many other issues – plenty of three-word slogans, not matched by results.

The repetition of Tony Abbott’s slogan, “open for business”, jars with the reality: a fragile economy, record trade deficits and declining business investment.

Australia has recorded a trade deficit in every month but three since the Abbott-Turnbull Government came to office.

Deteriorating trade performance is not only due to falling values in key resource commodities – Australia has also been experiencing slower growth in the volume of trade.

In the past, the volume of Australia’s trade has typically grown significantly faster than our economy’s growth rate.

But in recent times, two-way trade volumes have been growing at or below the rate of growth in GDP.

The rules of origin in the Abbott-Turnbull Government’s North-Asian trade deals have acted as a deterrent for would-be exporters.

The Liberals are not doing enough to provide small and medium-sized enterprises with the support they need to understand and take advantage of trade opportunities in the region.

The Abbott-Turnbull Government has also imposed new red tape on foreign investment, making Australia a less attractive investment destination.

MAKING TRADE WORK FOR BUSINESS

A Shorten Labor Government will make trade work for business.

Australia is not as trade-intensive as many advanced economies.

McKinsey Australia has noted that Australia is the 12th largest economy, but the 21st largest trader – one of just three of the world’s 15 largest economies not also amongst the world’s top exporting nations. [i]

There are relatively few exporting businesses in Australia – less than 5 per cent of all Australian businesses.[ii]

And many businesses are not considering exporting despite the opportunities in our region – PwC’s Passing Us By report shows two-thirds of Australian businesses have no intention of exporting into Asian markets in the near future.

Opening up access to new markets through trade agreements is a critical first step in boosting exports.

That’s why a Shorten Labor Government will seek to negotiate high quality international trade agreements – bilateral, plurilateral and multilateral – to improve market access for Australian exporters.

But Governments need to do more than tackle the barriers imposed at the borders.

They also need to tackle the barriers would-be exporters face at home – such as lack of information and market research, shortages of skills and expertise, market failures in access to finance, a lack of contacts in export markets and the impact of freight costs and red tape in moving goods across borders.

TACKLING BARRIERS TO AUSTRALIAN EXPORTS

Labor will adopt a strategic approach to improving market access for exporters by carrying out stocktakes of trade barriers faced by Australian exporters, both at home and abroad, and produce a regular Trade Barriers Analysis.

REDUCING RED TAPE FOR EXPORTERS

Labor will tackle red tape barriers by working to ensure trade agreements contain easily-understood and consistent rules of origin for determining whether Australian goods qualify for preferential access to key export markets.

Several surveys and reports show that many Australian businesses are not utilising market access opportunities available to them.[iii]

The complexity and costs of complying with rules of origin are one of the discouraging factors.

While there are no quick fixes, a Labor Government will work with Australia’s trading partners to streamline and harmonise existing rules of origin across trade agreements.

FACILITATING TRADE IN OUR REGION

Labor will work with key Asian trading partners to help them implement trade facilitation reforms which will encourage more two-way trade by reducing costs and improving efficiency.

The World Trade Organisation’s Trade Facilitation Agreement negotiated in 2013 has the potential to significantly reduce trade costs.

But many developing countries need technical assistance and capacity building support to implement these reforms.

A Shorten Labor Government will better target Australia’s “aid for trade” funding towards helping developing economies to implement these reforms.

SUPPORTING MULTILATERAL TRADE LIBERALISATION

Labor recognises that the greatest potential benefits from trade can be delivered through the WTO and multilateral trade reform.

Bilateral and regional trade agreements can be beneficial but often deliver second-best outcomes, not least through the proliferation of red tape and associated costs for exporters.

Labor wants bilateral agreements to be a stepping stone – and not a barrier – to multilateral reform.

Labor will work on the international stage to find new pathways for multilateral trade reform, to strengthen the role of the World Trade Organisation and to revive progress on key objectives of the Doha Round.

ATTRACTING INVESTMENT TO CREATE JOBS

Labor will make Australia a more attractive investment destination and support jobs by liberalising Foreign Investment Review Board (FIRB) screening thresholds for the farm and food sectors.

Australia relies on foreign capital to finance the shortfall between national savings and national investment.

The gap between Australia’s national savings and investment spending has averaged around 4 per cent of GDP over the last four decades.[iv]

This shortfall is made up by foreign investment.

Modelling by Access Economics has estimated that a 10 per cent increase in foreign direct investment inflows would increase real GDP by 1.2 per cent over a ten-year period and lead to more jobs and higher real wages. [v]

The Abbott-Turnbull Government has imposed new screening thresholds of $55 million for investment in agribusiness and $15 million (cumulative) for investment in agricultural land.

These changes have been the subject of widespread criticism from business, including the Business Council of Australia, Australian Food and Grocery Council.

Labor will:

  • Increase the screening threshold for investment in agricultural land to $50 million (non-cumulative), bringing all investors into line with the agricultural land threshold under the Howard Government’s trade agreements with Singapore and Thailand.
  • Remove the agribusiness screening category; and
  • Review the current regime’s discriminatory treatment of investments in non-sensitive sectors by investors from Singapore, Thailand and non-FTA trading partners and the treatment of agricultural land.

Under Labor, all proposed investments by foreign governments and state-owned enterprises will continue to be subject to FIRB screening, regardless of value.

PUTTING PEOPLE FIRST IN TRADE POLICY

Given the importance of trade and investment for Australia’s economic prosperity it is critical to maintain public support for an open international trading system.

The Abbott-Turnbull Government has undermined public confidence by surrounding trade negotiations in secrecy and by removing labour safeguards and including Investor-State Dispute Settlement provisions in trade agreements.

TRANSPARENCY IN TRADE NEGOTIATIONS

Labor is committed to greater transparency to build community confidence in trade negotiation outcomes.

Labor will:

  • Disclose the Government’s goals on the commencement of negotiations.
  • Provide regular public updates.
  • Engage a wider range of stakeholders.
  • Release draft texts during negotiations where feasible; and
  • Table the text of proposed agreements in Parliament before signing.

PROTECTING AUSTRALIA’S SOVEREIGNTY

A Shorten Labor Government will not accept Investor-State Dispute Settlement (ISDS) provisions in new trade agreements.

Concerns over the way ISDS provisions are being used to challenge public policies have been raised by economic and legal experts, including the Productivity Commission, The Economist magazine and the chief justice of the High Court of Australia.[vi]

The former Labor Government determined it would not accept ISDS provisions in new trade agreements.

The Abbott-Turnbull Government reversed this policy and has agreed to ISDS provisions in three new free trade agreements, including the proposed Trans-Pacific Partnership.

There are also ISDS provisions in four of Australia’s earlier free trade agreements and in 21 bilateral investment treaties.

Some of these provisions were drafted many years ago and do not contain the safeguards, carve-outs and tighter definitions of more contemporary ISDS provisions.

A Shorten Labor Government will develop a negotiating plan to remove ISDS provisions in these agreements.

Where this is not possible we will seek to update the provisions with modern safeguards.

ENSURING TRADE SUPPORTS LOCAL JOB OPPORTUNITIES

A Shorten Labor Government will ensure trade agreements allow Australia to maintain labour market testing safeguards in our temporary skilled migration system.

CONCLUSION

Labor supports trade because it contributes to economic growth, improves productivity, creates better-paid, more rewarding and more secure jobs and delivers lower prices and greater choice for consumers.

Labor’s trade policies will open new markets for exports of Australian goods and services.

We will help business translate the opportunities created by trade agreements into real outcomes.

We will also ensure trade agreements maintain the community’s confidence.

Under Labor, trade will work for business and most importantly, the Australian people.

 

ATTACHMENTS

Abbott-Turnbull Liberal Government’s FIRB screening thresholds

TYPE OF INVESTOR TYPE OF INVESTMENT
  AGRICULTURAL LAND AGRIBUSINESS BUSINESS IN SENSITIVE SECTORS* BUSINESS IN NON-SENSITIVE SECTORS
Foreign government investors $0 $0 $0 $0
Private investors from:        
United States, New Zealand, Chile $1,094 million $1,094 million $252 million $1,094 million
Japan, Korea, China $15 million (cumulative) $55 million $252 million $1,094 million
Singapore, Thailand $50 million

 

$55 million $252 million $252 million
Rest of world $15 million (cumulative) $55 million $252 million $252 million

 

Labor’s FIRB screening thresholds

TYPE OF INVESTOR TYPE OF INVESTMENT
  AGRICULTURAL LAND BUSINESS IN SENSITIVE SECTORS* BUSINESS IN NON-SENSITIVE SECTORS
Foreign government investors $0 $0 $0
Private investors from:      
United States, New Zealand, Chile $1,094 million $252 million $1,094 million
Japan, Korea, China $50 million $252 million $1,094 million
Rest of world (inc Singapore and Thailand) $50 million $252 million $1,094 million

 

* Media, telecommunications, transport, defence and military industries, uranium or plutonium extraction, operation of nuclear facilities. For investment in the media sector, a holding of at least five per cent requires notification and approval regardless of the value of the investment.

[i] McKinsey Australia, Compete to Prosper: improving Australia’s global competitiveness, July 2014, page 3, 7.

[ii] ABS, Characteristics of Australian Exporters 2013-14, Catalogue Number 5368.0.55.006, 23 June 2015.

[iii] The Economist Intelligence Unit, FTAs: fantastic, fine or futile? Business views on trade agreements in Asia, 2014; Australian Chamber of Commerce and Industry, ACCI Trade Survey, 2015; Australian Industry Group, Submission to Productivity Commission Inquiry into the Effectiveness of Free Trade Agreements, February 2010; Productivity Commission, Bilateral and Regional Trade Agreements: Research Report, November 2010, pp 91-107.

[iv] Treasury, “Foreign Investment into Australia”, Treasury Working Paper 2016-1, January 2016, p 10.

[v] Access Economics, Foreign Investment in Australia, February 2010, p 50.

[vi] Productivity Commission, Bilateral and Regional Trade Agreements: Research Report, November 2010, pp 265-77; The Economist, “The Arbitration Game”, 11 October 2014; Chief Justice Robert French, “ISDS – Litigating the Judiciary”, Speech to Chartered Institute of Arbitrators Centenary Conference, 21 March 2015.