Indonesia FTA in doubt as Labor tightens trade rules

JPEG - 108.5 kb

Financial Review, Australia

Indonesia FTA in doubt as Labor tightens trade rules

By Phillip Coorey

15 October 2018

The free trade agreement between Australia and Indonesia is in peril after Labor said it would not ratify the deal, or any other FTA in the pipeline, unless provisions allowing the importation of foreign workers and the ability of foreign governments to sue, were stripped out.

And Labor has vowed that should it win the next election, it will not only seek to renegotiate the Trans-Pacific Partnership to strip away these same provisions, but do the same with the free trade agreements that are already in effect with China and South Korea.

Furthermore, it will not allow future FTAs to be negotiated in secret and instead will insist that each round of negotiations be approved by a team of "accredited advisers" from industry, unions and civil society.

Union pressure

The declarations by opposition trade spokesman Jason Clare were among a raft of conditions he placed on Labor’s support for trade agreements, either in opposition or government, to buy peace with the trade union movement, which was angry over Labor’s support for the TPP, an 11-member regional free trade pact.

The opposition came under intense pressure from the labour movement to oppose the TPP due to it waiving labour market testing for workers from Canada, Peru, Mexico, Brunei, Malaysia and Vietnam, and including an investor-state dispute settlement (ISDS) clause with Canada that would allow Ottawa to take legal action against Australia if its commercial interests were hurt by government policy action.

Labor’s reluctant support means the TPP will be ratified with the opposition set to vote it through the Senate either late on Monday or Tuesday.

"This is not the agreement we would have signed. The government should have done more and could have worked harder to protect the rights of Australian workers," opposition foreign affairs spokeswoman Penny Wong told the Senate.

But the conditions outlined by Mr Clare for future support cast a cloud over the free trade deal with Indonesia which, sources confirmed, waives labour market testing and contains an ISDS clause. The Regional Comprehensive Economic Partnership (RCEP), a regional deal involving China that is also being negotiated, would also have to jump the new hurdles, as would planned deals with the European Union and Britain.

Indonesia FTA

But the Indonesian deal is the most imminent and Mr Clare told The Australian Financial Review that Labor could not support it at any cost.

"The Indonesian agreement is very important. I’ve said before that trade with Indonesia is massively underdone," he said. "That is why it’s important we get it right and a Shorten Labor government would work with Indonesia to do that."

A week after he became Prime Minister, Scott Morrison and new Trade Minister Simon Birmingham flew to Jakarta to shake hands on the deal with Indonesian President Joko Widodo.

There are plans to formally sign the deal on the sidelines of either the East Asia Summit in Singapore, or the Asia-Pacific Economic Co-operation summit in Port Moresby, New Guinea, both of which are in the middle of November.

After that, the deal must be scrutinised by a parliamentary committee for 20 sitting days, making it line ball as to whether the legislation will come before Parliament before the next federal election.

If the government signs any trade agreements in the next few months it is unlikely they will come before this Parliament for consideration before the next election. "If the current government were to sign a trade agreement between now and the next election that includes clauses that are prohibited in this legislation we wouldn’t support it in the Parliament before the election," Mr Clare said.

"And if we win the next election we will go back and renegotiate that agreement to take out those clauses before bringing any enabling legislation before the Parliament."

Unrealistic conditions

Senator Birmingham said the raft of conditions Labor would apply made it unlikely Australia would ever again sign an FTA. He said an ISDS provision had "never been used successfully against Australia despite being in our investment and trade agreements for more than 30 years".

"Labor’s stance on those sorts of provisions is a demonstration of why they would be, were they to be elected to government, a danger in terms of economic management because they would be incapable in many places of potentially finalising new trade deals and they would possibly leave Australian exporters at a disadvantage," he said.

"In fact, the previous Labor government in six years didn’t manage to finalise any new trade deals."

Other provisions Labor has identified as prohibited are those that require the privatisation of public services, undermine the Pharmaceutical Benefits Scheme, undermine Australia’s anti-dumping laws, limit the ability of the Australian government to regulate in the interests of public welfare or in relation to safe products, undermine mandatory skills testing requirements and place restrictions on government procurement.

ACTU president Michele O’Neil called the new conditions, which Mr Clare outlined in a private member’s bill, as "a seismic shift in ALP trade policy".

"The ACTU maintains its opposition to the TPP and its enabling legislation. The [private member’s] bill sets out a new course for trade in our country after years of damaging deals by the Abbott-Turnbull-Morrison government, which put big business profits ahead of working people," she said.

AMWU national secretary Paul Bastian, whose union was one of the most vocal critics of the TPP, remained disappointed with what he said was Labor’s betrayal of workers.

"However, we acknowledge that workers raised concerns and Bill Shorten listened. Now it’s time for Scott Morrison to do the same."