Free Trade Agreements must not trade away our national sovereignty

Mr STEPHEN JONES (Throsby) (10:17): Five years after the end of the Second World War the Korean peninsula was again thrust into a very bitter war. Hundreds of thousands of lives were lost, hundreds of thousands more were thrown into turmoil and for three years the Korean people were facing war on their soil. I use this story is an introduction to a discussion on the Korea-Australia Free Trade Agreement to make this point: in my lifetime South Korea has gone from a position of being a net recipient of aid from the rest of the world to being a net donor of aid to other countries within the region. There are many reasons for this: obviously a robust democracy, a lot of work has gone into the modernisation of its economy, a lot of cooperation between the private sector and the government sector, and obviously intense interest and assistance from the rest of the world to ensure that South Korea was able to get back on its feet. We are now in the happy position of having a very good diplomatic and trade relationship with South Korea as a democracy within the region. This trade agreement takes that relationship to another level.

We support free trade and we support the trade agreement with Korea, but, as my friend the member for Moreton has said in his contribution to this debate, there are some reservations. Were Labor still in government and if we had the opportunity to complete the work that we started in 2009, we would have concluded an agreement, but there would have been some differences—and I will go to those shortly.

The Republic of South Korea is our third-largest export market. This bilateral trade agreement presents significant opportunities for Australian exporters and for Australian workers. It is not without its downside. Any trade agreement involves trade-offs and often they felt within particular parts of the economy and particular regions around the country. They are felt within regions such as mine, a region that has traditionally gained its employment and its wealth from a mixture of manufacturing, mining and other services. When we reach agreements such as this, there is no doubt that it adds further pressure to those manufacturers who are competing against nations such as South Korea and others in an open market.

But I will say this. Over the time that I have lived and grown up in my region, the exports that we have focused on as a part of our regional economy have changed. It would surprise many to know that one of the biggest export earners in the Illawarra today is now the University of Wollongong, which has an enormous offering of undergraduate and postgraduate courses and an extremely strong foreign student coterie within its student numbers. It is incredibly important to the local economy. It does not replace the traditional industries such as mining and manufacturing, but it does go to show that the balance of exports and the shape of those exports, even in a region such as mine, has changed over my short lifetime.

The Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014 is a part of what I understand to be largely a bipartisan approach to the issue of trade and trade agreements. As many speakers have said in this debate, we made a turning point when it came to trade in this country, first in the 1970s under the leadership of Gough Whitlam and then in the 1980s under the leadership of the Hawke-Keating government. And, in the spirit of bipartisanship, that approach was extended under the Howard government and the Rudd and Gillard governments and continues today. These agreements are important.

The bill will give Australian exporters increased access to the Korean market and help maintain our competitiveness with the United States and the European Union within the Korean market, so we welcome the opportunities that the agreement can present for our exporters in both goods and services. We note in particular the potential gains that will be there for exports like beef, sugar, wheat, dairy and wine and for our horticultural producers. In total these sectors employ over 200,000 Australian workers.

The economic modelling suggests that the KAFTA will boost Australian exports to Korea by about $3.5 million by 2030, boost the Australian beef exports to Korea by about 59 per cent and boost Australia's GDP by about $650 million by 2030. It anticipates that there will be an additional 1,700 jobs created as a direct result of the agreement.

Modelling is modelling, and it will tell a different story. But the important thing about this agreement, I have to say, is that it shows that by working with a country that shares similar values to ours, in an open trading arrangement, we are able to turn that country from being a net recipient of aid over the last 50 years to a net donor of aid. And the best way to do that is by developing the economy, ensuring that there is a fair distribution of the wealth within the economy and ensuring that they are able to trade with countries within their regions.

I said at the outset that we have some problems with the agreement. I would like to turn my attention to those. We were deeply disappointed—in fact, we were dismayed—when the Minister for Trade and Investment, Andrew Robb, dropped the bombshell that the government had agreed to an investor-state dispute clause within this agreement. It ran contrary to a lot of the things that the then opposition had been saying in relation to international agreements with other countries. We have a problem with investor-state dispute clauses because they give foreign companies the right, which they would not otherwise have, to sue an Australian government when this parliament passes laws which may damage their commercial interests. We believe in the sovereignty of this parliament and we believe that we should not be reaching agreements which unreasonably constrain the ability of governments and this parliament to make laws on social, environmental or economic matters out of fear of legal retribution from companies based elsewhere.

We believe that investor-state dispute clauses are a good idea that has gone bad. The intent of these clauses, a long time ago—a long time ago—was to ensure that when businesses invested in another jurisdiction and those jurisdictions—and I will choose my words very carefully here—let us just say that they did not have the same robust democracies and separation of powers between the judicial and political systems. So those businesses investing in those countries could do it in the knowledge that if there was a coup or if there were an arbitrary takeover of their investments within those countries then those companies would have a redress other than the redress in the not-always-robust legal systems of those countries.

Deputy Speaker, you can see the sense in that. On the one hand we are saying, 'We think it's important that we get investment into a country that needs the development; it might need the capital and it might need the technology.' But you can see the reticence of those businesses wanting to invest in that if there has been a history of civil war, if there has been a history of arbitrary detention and if there has been a history of political interference in the judicial process.

But nobody could stand in this parliament and suggest that that is the history of trade agreements and foreign investment in this country. Nobody could suggest that. So whatever the virtues of investor-state dispute clauses in the beginning—in the genesis of the idea—nobody could suggest that there is a serious issue. I know that people like to use the words 'sovereign risk', but nobody could suggest that there is a serious issue of a business investing in Australia and an Australian government of any political hue arbitrarily taking over that business—in fact, it is prohibited by our Constitution—or that there is going to be some improper political interference in a domestic judicial process. It is beyond contemplation that it would happen in this country.

Whatever the merits of investor-state dispute clauses, that is not the situation in Australia today. I am very proud to say that. And I see the member for Fremantle in the chamber today; I know that she has been a passionate campaigner in respect of investor-state dispute clauses and the pernicious impact they can have on the making of social and economic policy in this country and in other countries around the world. I support what the member for Fremantle has to say in respect of this issue.

It is not like we are tilting at windmills, either. We have seen examples in our very recent history where a sovereign government has made decisions in the public interest—decisions that have enjoyed support across the parliament—that have then been subject to litigation in international forums because they interfered with the commercial interests of a foreign company. I have in mind the example that the member for Moreton alluded to in his contribution. It has been well over two years since Philip Morris Asia commenced litigation against the Australian government, against the plain-packaging tobacco laws that were passed through this parliament with the support of the then opposition and the government and passed into law. They were world-leading public health initiatives. It is true that the plain-packaging tobacco laws interfered with the commercial interests of cigarette companies. But we argue that it should be within the gift of a sovereign parliament and a government to pass laws which it believes to be in the interests of its population. These are not arbitrary laws. Let me put it this way: there will be other countries around the world which will be looking closely at what we are doing and are attracted to the public health benefits of the plain-packaging laws. I am quite certain it is with this in mind that Philip Morris has initiated action against the Australian government—to try to scare other jurisdictions out of passing similar laws. There can be no doubt Australia will succeed, but Australian taxpayers are still footing the bill of defending the action in international courts. They are still footing the bill for defending laws properly made in the Australian parliament for a proper purpose, and it is these examples—it is not fancy or folly; it is not like we are imagining that something might happen—which drove us to say that we cannot support causes such as these in free trade agreements.

While I have stood here and very fulsomely supported the reaching of trade agreements with our economic partners—and I do—I can inform the parliament that if Labor is successful at the next election we will seek to renegotiate this part of the treaty to revisit the issue of the investor-state dispute clauses. Whatever their genesis, nobody can say they apply to Australia today in terms of the risks associated with foreign investors.