Proposed China-Australia Free Trade Agreement

Submission 30

Submission:                                               from  Civil  Liberties  Australia      CLA  

 

Proposed  China-­‐Australia  Free  Trade  Agreement  (ChAFTA)  

 
Submission  to  the  Senate  Standing  Committee  on  Foreign  Affairs,  Defence  and  Trade  

 
Minister  Andrew  Robb’s  address  to  the  National  Press  Club  on  Monday  11  August  
2015  highlighted  the  reasons  why  the  Australian  public  has  so  many  misgivings  about  
the  pending  China-­‐Australia  Free  Trade  Agreement.  
One  of  the  many  claimed  benefits  of  the  agreement  relates  to  micro-­‐economic  
reform,  ostensibly  so  difficult  to  implement  through  parliamentary  processes.    
However,  many  Australians  would  be  uncomfortable  with  the  prospect  of  changes  to  
Australia’s  domestic  policies  being  brought  in  through  the  back-­‐door,  without  a  
public  mandate,  via  the  terms  of  free  trade  agreements  negotiated  behind  closed  
doors  with  officials  of  foreign  governments.    It  appears  that  some  hard-­‐won  and  
internationally  acclaimed  Australian  standards  may  have  been  offered  up  to  suit  the  
needs  of  foreign  countries,  and  traded  in  return  for  measures  which  benefit  narrow  
sectional  domestic  interests.    
With  regard  to  impacts  on  particular  segments  of  the  economy,  it  appears  that  “free”  
trade  agreements  have  been  used  to  pick  winners,  based  on  political  ideology  or  for  
electoral  advantage  or  patronage.    For  example  the  current  Coalition  government  
has  taken  a  hard  line  on  manufacturing,  signing  up  to  agreements  and  their  
attendant  MOUs  which  have  heavily  impacted  on  our  car  industry,  ship  building  and  
other  manufacturing  industries.    Australians  are  told  that  support  for  these  industries  
is  protectionism,  and  as  such  must  be  abandoned.    Yet  many  of  us  look  on  in  horror  
as  wave  after  wave  of  workers  are  laid  off,  causing  great  pain  and  hardship  to  many  
communities.  
On  the  other  hand,  many  other  countries  and  quite  a  few  eminent  economists  in  
recent  years  have  rediscovered  the  importance  of  maintaining  a  level  of  domestic  
manufacturing,  which  has  positive  spin-­‐offs  for  so  many  areas  of  the  economy  and  is  
a  major  requirement  for  developing  much-­‐vaunted  technological  innovation,  not  to  
mention  fostering  Australia’s  independence  in  times  of  war.    There  are  so  many  
reasons  why  we  need  to  nurture  our  engineers,  technocrats  and  tradesmen,  that  one  
is  amazed  that  the  case  even  needs  to  be  put.    But  we  cannot  do  this  without  a  viable  
manufacturing  base.      

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 Proposed China-Australia Free Trade Agreement
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Although  it  seems  that  protectionism  is  taboo  when  it  comes  to  manufacturing,  
substantial  subsidies  continue  to  be  available  to  fossil  fuel  industries,  even  though  it  
is  internationally  understood  that  there  is  no  future  in  these  industries,  and  their  
high  CO2  emission  levels  contribute  substantially  to  global  warming  and  the  
accompanying  pollution  of  our  country’s  air,  water  and  soil,  to  the  serious  detriment  
of  surrounding  communities.    At  best,  there  is  a  double  standard  operating.  At  worst,  
some  might  call  this  reckless  policy.      
 
‘Casual,  part-­‐time  and  insecure’  
There  is  a  great  deal  of  community  concern  about  further  Australian  job  losses,  due  
to  trade  agreements  at  this  time  of  growing  unemployment,  especially  amongst  
factory  workers  and  young  people.    Many  of  the  services  jobs  for  the  unskilled  and  
semi-­‐skilled,  which  will  ostensibly  replace  manufacturing  work,  are  casual,  part-­‐time  
and  insecure.    Such  work  arrangements,  while  providing  great  flexibility  to  
employers,  make  it  very  difficult  for  people  to  access  a  stable  level  of  income  
sufficient  to  meet  commitments  such  as  rent  and  bills.      
Unpredictable  hours,  poor  working  conditions  and  low  pay  put  further  training  out  of  
reach  for  many  young  people,  and  cut  off  the  possibility  of  home  ownership  –  
traditionally  a  major  source  of  financial  stability  for  Australian  families.    Except,  of  
course,  for  the  children  of  wealthy  parents  and  those  who  have  secured  the  scarce,  
highly  paid  positions.    
The  high  cost  and  variable  quality  of  vocational  training  is  discouraging  many  young  
people  from  attempting  courses.    Since  increased  privatisation  of  the  sector,  there  
are  now  dodgy  colleges  which  don’t  provide  proper  instruction,  including  some  
which  are  little  more  than  rorts,  signing  people  up  to  sub-­‐standard  courses  to  simply  
pocket  money  from  governments.      
It  seems  absurd  to  add  to  the  already  high  numbers  of  temporary  visas  holders  
competing  against  Australian  workers.    Despite  continuous  reassurances  that  labour  
market  testing  is  being  carried  out,  the  system  is  not  working  positively  to  the  
benefit  of  the  fabric  of  Australian  society.  Any  structure  that  rends  the  social  fabric  
tends  to  limit  civil  liberties,  curtail  freedoms  and  ultimately  threaten  human  rights,  
either  of  Australian  citizens  or  of  those  temporarily  visaed  to  work  in  Australian  
under  dubious  contracts  and  even  more  doubtful  conditions  of  employment.  
Furthermore,  at  a  time  when  we  need  to  be  encouraging  skills  acquisition  to  drive  
the  so-­‐called  “new  economy”,  many  young  people  are  already  missing  out  on  work  
experience  and  being  replaced  by  457  visa  holders.    Although  claims  are  made  about  
labour  market  testing  prior  to  approving  temporary  visa  holders,  in  practice  such  

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testing  is  often  not  done  and  locally  qualified  applicants  are  simply  not  given  a  
chance.  
For  example,  many  nursing  and  aged  care  positions  are  being  filled  by  temporary  visa  
holders,  even  though  there  is  a  surplus  of  qualified  Australian  staff.    Temporary  visa  
holders  under  the  visa  classes  457,  442  and  485  and  working  holiday  visa  holders  
make  up  a  large  part  of  the  nursing  workforce,  despite  the  fact  that  large  numbers  of  
Australian  nurses  and  aged  care  workers  remain  unemployed,  adding  to  the  cost  of  
unemployment  benefits  paid  with  taxes  taken  from  the  hard-­‐earned  income  of  the  
Australian  people.  
 
Disincentive  to  training  
Of  course,  such  practices  on  the  part  of  employers  are  a  further  disincentive  to  
training.    Either  the  system  has  broken  down,  or  it  is  deliberately  framed  to  exclude  
local  nurses  and  aged  care  workers  from  employment,  to  the  benefit  of  overseas  
workers.    There  are  similar  effects  in  other  sectors.    
ChAFTA  will  exacerbate  this  situation  by  allowing  unprecedented  access  to  Chinese  
workers,  which  will  not  be  reciprocated.    Chinese  companies  investing  more  than  
$AU150  million  will  be  able  to  import  temporary  workers  without  labour  market  
testing.    And  apparently  this  applies  to  companies  which,  although  not  Chinese-­‐
owned,  may  simply  have  a  substantial  level  of  Chinese  investment.    Although  these  
Chinese  workers  will  apparently  be  paid  the  statutory  rate,  past  experience  with  
temporary  visa  categories  does  not  inspire  confidence.  
The  possibility  is  open  for  local  firms  to  acquire  a  Chinese  investor  simply  to  cut  out  
local  workers,  especially  perhaps  those  who  are  unionised  and  able  to  bargain  for  
decent  above-­‐award  wages  and  conditions.    It  is  not  clear  from  the  MOU  that  any  
labour  market  testing  is  required.    This  could  constitute  a  betrayal  of  Australian  
workers,  some  of  whom  have  fought  for  this  country,  all  of  whom  have  paid  taxes  
and  pay  the  salaries  and  allowances  of  our  politicians.    These  are  the  very  people  
whose  interests  the  Australian  government  is  elected  to  represent.    
The  likely  lower  rate  paid  to  Chinese  workers  who  have  not  had  the  chance  to  
negotiate  their  terms  and  conditions  will  give  Chinese  firms  or  firms  with  Chinese  
investors  an  unfair  advantage  over  local  Australian  firms.    As  the  numbers  of  such  
special  condition  firms  expands,  their  freedom  from  paying  the  going  rate  and  lesser  
requirements  for  occupational  health  and  safety  provisos  could  be  used  to  drive  
down  Australian  wages  and  conditions  more  generally  in  the  relevant  industries.    If  
this  consequence  has  been  foreseen,  but  has  been  accepted  with  alacrity  by  the  
government,  it  amounts  to  a  deliberate  selling-­‐out  of  Australian  workers.    

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It  is  worth  noting  that  low  wages  and  a  fast-­‐growing  growing  income  divide,  such  as  
is  developing  in  Australia,  is  a  situation  that  most  economists  now  realize  is  an  
impediment  to  economic  growth.    Ironically,  one  of  the  main  protections  against  this  
tendency  is  the  maintenance  of  an  effective  union  movement.  
It  is  disappointing  that  any  hint  of  critiquing  ChAFTA  and  other  recent  agreements  is  
summarily  dismissed  by  the  government  and  blamed  on  “the  anti-­‐trade  unions”  or  
“the  greenies.”  
In  fact  there  are  many  individuals  and  organisations  expressing  real  concerns  about  
aspects  of  ChAFTA  and  other  similar  agreements.    These  include  economists,  the  
Productivity  Commission,  journalists,  academics,  prominent  lawyers  such  as  the  Chief  
Justice  of  the  High  Court  of  Australia,  Mr  Justice  French,  doctors,  nurses,  public  
health  groups,  consumer  groups  such  as  CHOICE,  civil  liberties  groups,  welfare  
groups,  environmentalists,  fair  trade  groups,  conservationists,  scientists,  farmers,  
charities,  churches  (including  the  Vatican),  welfare  groups,  businessmen,  arts  groups  
and,  of  course,  many  trade  unions.    There  is  a  plethora  of  reports  cited  and  quoted  
again  and  again  in  previous  reports  and  submissions  to  this  government  on  the  
proven  ineffectiveness  –  and  predicted  danger  –  of  recent  trade  agreements,  and  on  
the  lack  of  proper  pre-­‐  and  post-­‐implementation  assessment  by  the  Executive  and  
Ministers.  
 
Hoodwinked  by  previous  trade  agreements  
We  as  citizens  require  the  government  to  take  into  account  negative  critiques  also,  
instead  of  merely  adopting  blue-­‐sky  predictions,  from  departments  and  agencies  
with  no  real-­‐life  experience  behind  them,  without  a  skerrick  of  substance  to  back  up  
their  over-­‐blown  claims.  
Suffice  to  say  that  the  Australian  public  has  felt  hoodwinked  by  the  actual  outcomes  
of  previous  trade  agreements  and  their  failure  to  live  up  to  government  promises.    
For  example,  we  were  promised  great  things  from  the  Australia-­‐United  States  Free  
Trade  Agreement,  but  the  economic  impact  after  10  years  appears  to  have  been  
negative.    Now,  once  again,  we  are  being  asked  to  accept  yet  another  bilateral  
agreement  on  trust,  in  the  absence  of  any  reliable  modelling  to  support  a  case  for  
going  ahead.    In  fact,  the  assessment  done  by  the  Centre  for  International  Economics  
(CIE),  using  fairly  optimistic  assumptions,  predicts  negligible  benefits  after  20  years  
from  the  combined  effects  of  ChAFTA  and  the  free  trade  agreements  with  Korea  and  
Japan  –  in  the  order  of  0.11%  after  20  years  of  operation.    Economists  agree  that  the  
National  Interest  Analysis  is  inadequate,  and  many  commentators  have  called  for  
independent  and  comprehensive  assessments  of  FTAs.    It  is  worth  re-­‐highlighting  
that  these  concerns  are  not  restricted  to  the  “left”  of  politics.  

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In  Minister  Robb’s  recent  address  to  the  National  Press  Club,  he  spoke  a  lot  about  
the  consultations  with  businesses,  and  said  that  the  other  end  of  town  would  not  be  
forgotten  –  by  which  he  apparently  meant  small  business.    He  stated  that  
information  sessions  with  small  businesses  would  be  held  around  Australia  to  explain  
how  they  can  best  capitalise  on  the  agreement.    At  no  time  did  he  mention  anything  
equivalent  being  organised  for  trade  unions  and  civil  society  organisations.      
It  appears  that  the  government  has  focussed  entirely  on  groups  it  sees  as  its  own  
constituency,  leaving  the  rest  of  the  country  in  the  dark,  with  nothing  but  assurances  
that  the  government  would  not  do  anything  that  is  not  good  for  Australia.    Well,  we  
have  heard  those  words  before!    And  they  have  proved  the  harbingers  of  false  
prophets.  
Instead  of  branding  the  unions  as  anti-­‐trade  and  accusing  them  of  getting  the  facts  
wrong  and  running  a  scare  campaign,  surely  it  would  have  been  better  to  keep  the  
unions  in  the  loop.    If  the  implications  for  ordinary  working  people  are  not  as  bad  as  
some  unions  believe,  why  not  address  the  actual  issues  they  raise  and  deal  with  
them  in  detail,  instead  of  just  accusing  unions  of  spreading  inaccurate  information?  
There  are  fears  in  the  community  that  less  checking  of  imported  Chinese  materials  
would  lead  to  health  and  safety  problems.    Building  cladding  from  China,  used  on  
several  sites,  has  proved  to  be  highly  flammable  and  there  are  complaints  that  whole  
walls  have  burst  into  flame  and  released  toxic  fumes  into  the  surrounding  streets.    
There  are  also  problems  with  electrical  cabling  which  can  cause  electric  shocks  and  
burst  into  flames,  putting  lives  at  risk.    One  union  claims  that  asbestos  is  being  
imported  in  various  products  from  China,  including  particle  boards,  brake  linings  and  
crayons.    Such  cases,  whether  verified  or  not,  are  of  great  concern  to  Australians.    It  
is  not  as  if  China  has  an  exemplary  record  for  safety:  the  recent  Tianjin  explosion  is  a  
highly  relevant  example  of  the  cavalier  nature  of  Chinese  attention  to  rules  and  
regulations.  
It  seems  ridiculous  that  after  more  than  a  century  spent  in  rigorous  testing  and  
developing  health  and  safety  standards  which  are  the  envy  of  the  world,  Australians  
are  in  danger  of  opening  the  floodgates  to  shoddy  and  dangerous  imports.    Some  red  
tape  is  a  necessary  price  for  safe  and  healthy  homes  and  workplaces:  Australians  
operate  to  the  basic  expectation  that  our  workers  can  go  home  to  their  families  at  
the  end  of  each  working  day.  
A  serious  problem  with  this  agreement  is  the  presence  of  an  Investor  State  Dispute  
Settlement  (ISDS)  clause,  which  will  allow  Chinese  companies  to  sue  Australian  
governments  under  certain  conditions.    There  are  major  problems  with  ISDS:  

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• The  existing  version  of  this  clause  is  not  the  final  one,  and  apparently  the  
government  plans  to  ask  for  ChAFTA  to  be  ratified  and  put  into  operation  
without  the  crucial  final  format  of  the  ISDS  clause  being  known.    This  is  
tantamount  to  buying  the  proverbial  “pig  in  a  poke.”    It  is  a  basic  business  
practice  not  to  sign  off  on  something  you  haven’t  seen!  Signing  such  an  
agreement  is  classic  proof  of  the  naivety  of  Australian  government  negotiators  
at  all  levels.    
• The  ISDS  clause  will  allow  Chinese  corporations,  under  certain  circumstances,  
possibly  for  loss  or  potential  loss  of  profits,  to  sue  Australian  governments  in  
overseas  “tribunals”  (not  made  up  of  judges)  which  are  not  bound  by  legal  
precedent  and  do  not  allow  appeals.  
• ISDS  penalties  can  be  astronomical,  and  even  if  the  country  wins  the  case,  the  
cost  of  mounting  a  defence  has  been  estimated  at  tens  of  millions  of  dollars.  
•  Although  Australian  companies  will  theoretically  have  the  same  rights  to  sue  
the  Chinese  government,  in  practice  there  are  few  if  any  Australian  companies  
with  sufficient  financial  weight  to  sue  any  government,  let  alone  the  
government  of  a  rich  and  powerful  state  such  as  China.    This  aspect  of  the  
agreement  although  theoretically  fair,  would  in  practice  operate  unequally  in  
China’s  favour.    
• Even  though  state  and  local  governments  will  not  have  a  right  to  vote  on  this  
treaty,  they  will  also  be  liable  to  be  sued  by  Chinese  conglomerates  under  
ISDS:    the  costs  of  litigation,  let  alone  a  penalty  awarded  against  them,  could  
destroy  the  economy  of  a  state  government,  let  alone  a  local  council  for,  say,  
trying  to  protect  the  environment  and  the  local  people  from  leaks  of  deadly  
chemicals  leaching  from  a  mining  operation.    
• There  are  documented  instances  where  governments  have  been  warned  by  
companies  not  to  pass  certain  legislation  under  threat  of  an  ISDS  case.    Even  
without  an  express  warning,  governments  can  be  deterred  from  passing  
socially  beneficial  legislation  –  the  so-­‐called  “regulatory  chill”  factor.    
• ISDS  clauses  inherently  rob  state  actors  of  their  sovereignty:  by  preventing  
government  from  carrying  out  its  legislative  mandate,  The  clauses  are  anti-­‐
democratic,  which  strikes  at  the  liberties,  freedoms  and  rights  of  Australians.  
• Because  local  firms  lack  the  same  right  (as  Chinese  entities)  to  sue  
governments  for  decisions  they  regard  as  adverse  to  their  interests,  there  is  a  
major  incentive  for  Australian  companies  to  move  offshore  to  gain  this  
“advantage.”    This  will  cause  further  bleeding  of  Australian  jobs,  with  
consequent  loss  of  taxation  revenue  and  increased  spending  on  
unemployment  benefits.    This  is  what  many  US  firms  did  in  the  wake  of  the  
North  American  FTA,  NAFTA.  

Civil  Liberties  Australia  Inc.  A04043   ChAFTA  sub  20150821       6  

 Proposed China-Australia Free Trade Agreement
Submission 30

As  many  economists  have  noted  in  the  past,  bilateral  agreements  such  as  this  one,  
between  nations  where  there  is  such  an  asymmetry  in  wealth  and  power,  always  
favour  the  richer  partner  at  the  expense  of  the  weaker  one.    That’s  us,  the  (very  
much)  weaker  power.  
There  would  also  be  an  imbalance  in  the  size  and  strength  of  individual  companies.    
One  can  imagine  the  results  of  competition  between  a  small  to  medium  sized  
Australian  firm  and  a  powerful  Chinese  corporation.  
Cashed-­‐up  Chinese  companies  will  have  much  deeper  pockets  and  be  able  to  lobby  
more  effectively  than  local  firms.    Secondly,  large  companies  can  always  outbid  
smaller  ones,  because  they  are  able  to  sustain  initial  losses  in  the  short  term,  possibly  
putting  local  firms  out  of  business.    Thirdly,  foreign  companies  will  have  the  implied  
threat  of  suing  governments  on  some  pretext  or  other  if  they  don’t  get  their  own  
way.    
In  the  past,  Australia  has  resisted  ISDS  clauses  in  agreements  with  nations  where  the  
rule  of  law  and  reliable  court  systems  operate.    This  was  a  bipartisan  position  when  
Prime  Minister  John  Howard  finalised  the  Australia-­‐US  Trade  Agreement  with  the  
USA  10  years  ago.    Now  however,  it  appears  we  are  going  to  include  ISDS  not  only  in  
ChAFTA,  with  China,  but  also  possibly  in  the  Trans  Pacific  Partnership,  which  of  
course  includes  the  United  States.  
It  is  fair  comment  that  these  countries  are  rivals,  not  only  economically,  but  
strategically.    Both  countries  have  sought  influence  over  Australian  government  
policy  in  various  areas.    One  would  hope  that  this  would  never  happen  but,  
nevertheless,  by  signing  up  to  ISDS  clauses  with  both  these  nations,  Australia  could  
find  itself  in  the  line  of  fire,  locked  in  a  desperate  attempt  to  satisfy  the  conflicting  
demands  of  two  ambitious  superpowers  and  their  avaricious  corporations.  
 
ENDS  

CLA Civil Liberties Australia Inc. A04043

Box 7438 Fisher ACT Australia
Email: secretary [at] cla.asn.au
Web: www.cla.asn.au
21 Aug 2015

Lead author: Pauline Westwood; co-author: Bill Rowlings

Civil  Liberties  Australia  Inc.  A04043   ChAFTA  sub  20150821       7