Joint Standing Committee On Treaties Trans-Pacific Partnership Agreement
Opening Statement by Chief Negotiator Elizabeth Ward
22 February 2016
Thank you Mr Chairman for giving me the opportunity to make an opening statement to the Joint Standing Committee on Treaties on the Trans-Pacific Partnership Agreement (TPP).
Over the last three decades Australia’s trade policy pursued by successive governments, has reflected the philosophy which underpins our broader domestic economic policy settings - openness, competitiveness, and flexibility. Australia’s pursuit of more open trade, investment, movement of people, and ideas across borders, fundamentally, is a means to ensure Australia retains a competitive environment that drives productivity and the efficient utilisation of resources within the Australian economy. An open trading economy, in short, stimulates economic activity and creates jobs.
Australia has already seen the benefit of substantial liberalisation of its own trade barriers taken over the last several decades - we know that unilateral reform pays the greatest dividends. But, benefits also accrue to Australia from the reduction of barriers to trade and investment in the economies of our trading partners, particularly in the Asia-Pacific region. And for as long as Australia’s commercial interests are likely to remain focused in this dynamic region that will drive global growth in the 21st Century, our trade policies will be focused on promoting open economies in that region as a priority.
Over the past decade, Australia has actively participated in intensive activity in the Asia-Pacific region to link our economy into increasingly integrated systems and ways of doing business. We have done this through the negotiation of Free Trade Agreements as well as promoting the trade facilitation work of APEC. We have concluded several far-reaching bilateral free trade agreements with major trading partners, such as China, South Korea and Japan, and are also involved in others such as RCEP.
Mr Chairman, Australia also decided to join the Trans-Pacific Partnership negotiations.
The TPP negotiations were formally launched in 2010 with Australia hosting the first round in Melbourne. After five years of intensive negotiations the deal was struck in Atlanta, United States of America on 5 October 2015. The TPP is a plurilateral agreement between the 12 countries of Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States of America and Vietnam.
The Agreement was signed by the former Trade and Investment Minister, Andrew Robb, on 4 February in Auckland, New Zealand and tabled, along with the National Interest Analysis, in the House of Representatives on 9 February 2016. The Agreement now sits before you for consideration.
The TPP is an historic deal for many reasons. It represents the largest trade liberalising deal concluded anywhere in the world for over twenty years. Not since the Uruguay Round of multilateral negotiations, has such an ambitious, comprehensive and market opening deal been achieved. It is important because it will integrate twelve economies in the Asia-Pacific region. These economies include three of the largest in the world such as the United States, Japan and Canada but also five of Australia’s top ten goods export markets: Japan, the US, New Zealand, Singapore and Malaysia. It is important because the twelve Parties to the TPP together account for around 40 per cent of global GDP. And it is important because this is our neighbourhood – the geo-strategic benefits of closer economic ties are undeniable.
We have heard some commentators say that the overall value of the TPP to Australia is small in terms of GDP growth and therefore not commercially meaningful. They cite the World Bank, for example, that concluded through its modelling that Australia will benefit by GDP growth of around 0.7 per cent by 2030.
Mr Chairman, setting aside the question of what such models can and can’t do, a 0.7 per cent increase to Australia’s GDP as a result of the TPP is not insignificant. This represents a US$15 billion permanent increase to Australia’s economy. At this time of slowing global growth, no economist would turn away a permanent top up to GDP of this nature. I would note that in comparison, studies of other multi-party trade negotiations – such as modelling the conclusion of the WTO Doha Round would see GDP increases of 0.5 per cent or less, and the Uruguay Round, completed in the mid-1990s an even lower figure at about 0.2 per cent.
Additionally, the commentary ignores the fact the TPP that has been signed is intended as a foundation stone – this agreement is open to other economies to join and therefore, over time, the benefits to Australia will increase. Since its inception, the Australian Government has conceived of the TPP as one possible concrete pathway towards realising the long -term vision of a Free-Trade Area of the Asia-Pacific encompassing all APEC economies. TPP has already had a head-turning effect within APEC. Significant regional economies with burgeoning middle classes such as South Korea, Indonesia, Thailand and the Philippines have already indicated a desire to join. And as an original signatory party to the TPP, Australia is occupying a prime position to reap the benefits of future reforms through our region.
So what are the benefits of this deal?
Typically we refer in our trade deals to the market access wins - removing barriers to trade in goods, services and investment between nations. The TPP provides significant outcomes - that build on existing FTAs, and deliver new access into markets in Mexico, Canada and Peru - with whom we do not have existing Free Trade Agreements.
Australia exported around $88 billion worth of goods to TPP counties in 2014. The TPP will eliminate over 98 per cent of the tariffs that these goods face in the region. In the often highly protected agriculture sector, tariffs will be eliminated on more than $4.3 billion of our dutiable exports. A further $2.1 billion worth of dutiable agriculture exports will receive significant new preferential access. Producers of beef, sugar, dairy, rice, cereals, wine and seafood are all set to gain. Our exporters of manufactured goods will also benefit from complete tariff elimination, creating new opportunities for exporters of iron, steel, ships, mining equipment, and automotive parts. While our resources and energy sectors will benefit from elimination of remaining tariffs on products such as iron ore, copper, nickel, petroleum and liquefied natural gas.
Australia’s sophisticated services sector (currently worth around 74 per cent of Australia’s GDP) is also set to benefit significantly.
TPP countries accounted for around 24 per cent of the world’s trade in services with Australian services exports to TPP countries worth over $20 billion in 2015 or almost 35 per cent of total Australian services exports. Service exporters set to gain include providers of professional, education, transport, telecommunications, health, hospitality and tourism services. The mining equipment, technologies and services and oilfield service providers will be given major new commercial opportunities through liberalisation in mining, resources and energy sectors of our TPP Parties.
Our business community has made clear to us that the ability of business persons to move across borders is an integral feature of modern business and a crucial contributor to growth in Australia’s commercial relations. In response to their needs we have entered into preferential temporary entry commitments on a reciprocal basis with a number of our TPP Parties for skilled business persons and their spouses. To give you some sense of the balance of the deal struck for the Australian business community, the Department of Immigration and Border Protection has calculated that the number of 457 visas given to TPP Parties with whom we have extended new preferential temporary entry commitments represents less than half of one per cent of all 457 visas issued in FY 2014-15.
And finally on market access, the TPP outcome will provide opportunities to Australian business to access government procurement markets across the region. For the first time, Australian businesses will be able to bid to supply a broad range of goods and services to Brunei Darussalam, Canada, Malaysia, Mexico, Peru and Vietnam. For many of these TPP partners, the government procurement markets are a significant proportion of their economy, and for our South East Asian neighbours, the first time they have opened their procurement markets to any foreign suppliers of goods and services.
Fundamental to the TPP Mr Chairman, and alongside the new market access opportunities, rules have been negotiated to guide trade in our region. Through the comprehensive 30 chapters that provide the backbone of this deal, we have built on the global rules in the WTO, to set common standards to enable ease of business, shape outcomes to deal with contemporary commercial challenges, and at the same time safeguard our interests.
Mr Chairman, the TPP contains provisions which, when implemented, will result in more transparent and efficient customs procedures, regional rules of origin which allow for a preferential supply chain through the TPP region, a single set of documentary procedures for products traded within the TPP, and mechanisms to address non-tariff barriers our exporters face. This Agreement also addresses, for the first time, the specific needs of small and medium sized enterprises with a view to helping them take advantage of the export opportunities and move towards paperless trading.
Mr Chairman, foreign investment is important to Australia – both our capacity to attract foreign investment, and the benefits that accrue to Australia from our businesses investing abroad. Australian investment in TPP countries is 45 per cent of all outward investment, reaching $868 billion in 2014. Investment in Australia from TPP countries more than doubled in the last decade to reach $1.1 trillion in 2014.
Mr Chairman, concerns have been raised about the inclusion in the TPP of an Investor-State Dispute settlement mechanism. The investment chapter in the TPP provides a carefully negotiated balance to ensure that modern high-standards of governance required to attract foreign investment are upheld while guaranteeing to governments that they will be able to continue their job of regulating in the public interest.
The robust safeguards included here make it one of the most protective ISDS mechanisms worldwide, and preserve the right of the Government to continue regulating in the public interest, pursuing legitimate public welfare objectives such as public health, safety and the environment. Moreover, Australia’s tobacco control measures, the subject of the sole ISDS case Australia has faced in the 30 year history of having such dispute mechanisms in our various investment and trade treaties, cannot be challenged under the TPP.
The TPP also establishes a common and balanced set of rules on intellectual property which aims to encourage investment in new ideas, support creative and innovative industries, address and prevent piracy and counterfeiting and promote the dissemination of information, knowledge and technology. The Intellectual Property Chapter is consistent with Australia intellectual property regime and will not require any changes to Australian policy or legislation. Moreover, the TPP will not require Australia to make changes to the Pharmaceuticals Benefits Scheme – the TPP will not increase the cost of medicines for Australians under our public health system.
Mr Chairman, the TPP has afforded an opportunity to develop first-time- ever trade rules.
In short, for the first time in any trade agreement, disciplines have been developed that will level the playing field for Australian businesses competing with large State Owned Enterprises and help ensure Australian goods and services suppliers can compete fairly for their contracts.
The TPP includes the most comprehensive and current rules on e-commerce in any trade agreement across the globe. Rules on the movement across borders and storage of data onshore, will provide a platform for growth in Australian ICT exports. At the same time, Australia’s regulatory framework including the Privacy Act will be protected.
The levels of environmental protection set out in the TPP are the most extensive agreed by Australia in any trade agreement, including ensuring TPP Parties effectively enforce their domestic environmental laws.
The labour chapter is also the broadest ever agreed by Australia, and requires of all TPP Parties enhanced compliance with internationally-recognised labour rights such as elimination of forced labour, abolition of child labour, freedom of association and the right to collective bargaining.
Finally, for the first time in any trade agreement, the TPP includes robust provisions combating corruption and bribery of public officials and other acts of corruption adversely affecting international trade and investment. These anti-corruption provisions will provide greater transparency and certainty to Australian individuals and businesses seeking to trade with and invest in TPP Parties.
Mr Chairman, throughout the negotiations, we have consulted extensively, often in the wee hours of the morning and across time zones. From the broad-brush to the forensic, we have discussed the inclusion of ideas, the management of Australian interests, and even, on occasion the placement of commas in text. At the federal level, the TPP represents an intensive whole-of-government exercise as is reflected today. State governments, whose interests are reflected in this outcome, have been involved in the decision making process too. We have engaged the business community, the farming sector, academics, the unions, civil society groups. The outcome is a treaty which we believe very much reflects Australia’s national interest.
We commend the TPP and associated NIA to the JSCOT for its consideration.