Bills Digest no. 56 2012–13
PDF version [564KB]
WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Eugenia Karanikolas, Economics Section
Leah Ferris, Law and Bills Digest Section
27 November 2012
Contents
Purpose of the Bill
Background
Committee consideration
Policy position of non-government parties
Major interest groups
Financial implications
Main issues
Key provisions
Date introduced: 1 November 2012
House: House of Representatives
Portfolio: Home Affairs
Commencement: Sections 1-3 and item 1 of Schedule 2 commence on Royal Assent. Schedule 1 commences on 1 January 2013, or the day the Malaysia-Australia Free Trade Agreement, done at Kuala Lumpur on 22 May 2012, enters into force in Australia, whichever occurs later. However, the provisions set out in Schedule 1 do not commence at all if the Agreement does not enter into force in Australia. When the Agreement does enter into force, the Minister must announce this via a notice in the Gazette. Items 2-5 of Schedule 2 commence immediately after the commencement of Schedule 1 of the Customs Amendment (New Zealand Rules of Origin) Act 2012.[1]
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.
The purpose of the Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012 (the Bill) is to amend the Customs Act 1901 (the Customs Act)[2] to give effect to the Malaysia-Australia Free Trade Agreement, done at Kuala Lumpur on 22 May 2012 (MAFTA).[3]
In particular, the Bill provides for:
- the rules for determining whether goods can be considered Malaysian originating goods (and therefore are eligible to receive preferential rates of duty upon entering Australia) and
- the record keeping obligations of Australian exporters when exporting goods to Malaysia, where a preferential rate of duty will be claimed, and on the producers of such goods.[4]
Amendments will also need to be made to the Customs Tariff Act 1995[5] to reflect the new duty rates specified in MAFTA.[6]
The Bill also corrects a number of misdescribed amendments contained in the Customs Amendment (New Zealand Rules of Origin) Act 2012 (the NZ Rules of Origin Act).[7]
A trade agreement is a written contract between two or more states for the purpose of regulating trade between the parties. Most trade agreements fall into two categories- multilateral or bilateral. Multilateral agreements refer to an agreement between two or more states and are often used to establish a collective set of rules governing conduct in a particular area.[8] Bilateral agreements (between two states) and plurilateral agreements (between more than two states) establish a system of mutual benefit in respect of trade and investment and are often known as free-trade agreements (FTAs).[9] Under FTAs, non-trade terms can be negotiated, such as a services agreement and improved customs protocol, and typically there is a phase-in period for free trade between the two countries.[10]
Australia has long been a supporter of trade liberalisation undertaken on a ‘non-discriminatory’ basis. Australia has committed itself over the years to reducing its trade barriers and has supported multilateral efforts through organisations such as the World Trade Organisation (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT).
In the past two decades however, there has been a four-fold increase in the signing of FTAs around the world, to around 300 active free trade agreements in place.[11] This development is often attributed to the stalling of the Doha Round[12] and the increasing doubt about the extent that multilateral efforts can continue to deliver further reduction in trade barriers.
Australia’s trade policy has been mirroring these international trends with the country now being a signatory to six free trade agreements.
Up until 2003 Australia’s only major trade agreement was with New Zealand, under the 1983 Australia-New Zealand Closer Economic Relations Trade Agreement.[13] Since then, Australia has entered into five other major trade agreements[14]:
- Singapore-Australia FTA (commenced 28 July 2003)[15]
- Australia-Thailand FTA (commenced 1 January 2005)[16]
- Australia-United States FTA (commenced 1 January 2005)[17]
- Australia-Chile FTA (commenced 6 March 2009)[18] and
- ASEAN-Australia-New Zealand FTA (commenced 1 January 2010).[19]
Malaysia is a high/middle income export oriented economy, whose Gross Domestic Product (GDP) is currently growing at around 4.9 per cent a year.[20] In recent times the Malaysian Government has been making efforts to ease restrictions on foreign investment in services. The aim of the country’s recent structural reforms is to increase the services sector’s share of GDP to 60 per cent by 2020 and reduce the country’s reliance on lower value (requiring lower-skilled and lower paid labour) manufactured exports.[21]
Malaysia is continuing its efforts to liberalise its trade policy. In 2009, around 60 per cent of the country’s tariff lines were duty free and this will continue to increase as Malaysia enters into more regional and bilateral trade agreements.
However, despite efforts to liberalise Malaysia’s trade policy the country still employs trade restrictive measures. Of particular concern are the non-tariff border measures (NTMs), which are measures other than tariffs that have an impact on the trade flow. NTMs tend to be less transparent than tariff measures and are increasingly being used as a tool to achieve broader public policy objectives. In particular, according to the WTO’s latest Trade Policy Review for Malaysia:
A considerable portion of Malaysia's tariff lines are subject to import licensing, most of which is non-automatic. While automatic licensing is intended for data collection, the authorities maintain that non‑automatic licences are mainly for sanitary and phytosanitary reasons (for [those concerning] agriculture); non‑automatic licensing is also intended to regulate the flow of imports and to promote selected strategic industries identified for certain socio-economic objectives.[22]
This trend by governments to impose NTMs, which is believed to have largely resulted as a response to the global reduction in tariffs, has been highlighted as a key ongoing challenge for the international trading system.[23] Pascal Lamy, the WTO’s Director-General, believes that the world trading community is ‘moving from protection to precaution’[24], and went on to say that increasingly the cases appearing before the WTO requiring dispute settlement are due to tensions between ‘good public policy and hidden protection’.[25]
Unlike Malaysia, Australia is one of the most open economies in the world and, as was noted in the summary of the most recent WTO Trade Policy Review, the country’s trade policy ‘is characterised by an unusually high degree of transparency’.[26]
Tariffs are Australia’s main trade policy instrument. While there are some NTMs such as import restrictions and prohibitions in place, especially in the areas concerning public health and the environment, they are generally compliant with international standards and the WTO’s sanitary and phytosanitary measures.[27]
Malaysia is Australia’s tenth largest trading partner and third largest in the Association of Southeast Asian Nations (ASEAN). In 2011, the two-way trade between Australia and Malaysia was worth $16 billion or 2.6 per cent of Australia’s total trade in goods and services.[28]
Australia’s exports to Malaysia are currently worth $4.49 billion, with the major goods exported being crude petroleum, copper and coal.[29] Malaysia’s key exports to Australia included crude petroleum, refined petroleum and electronic equipment, such as televisions and computers.[30] In 2011, Malaysia exported $8.56 billion worth of goods to Australia.[31]
In 2011, the total trade in services between the two countries was $2.97 billion.[32] In 2011, Australia exported $1.64 billion worth of services to Malaysia and imported $1.33 billion. Australia’s largest services exports to Malaysia are education, personal travel and transport services and its top services imports from Malaysia are transport and personal and business travel.[33]
In 2005 when the negotiations for a FTA began between the two countries, the then Australian Minister for Trade, Mark Vaile, highlighted the importance of strengthening Australia’s economic relationship with Malaysia and building on the ‘strong links in areas including commodities trade, education and tourism’.[34]
This logic for entering into MAFTA appears to still be endorsed by the current Government. In addition, and in light with the recent release of the Asian Century White Paper, the Government has highlighted the importance of engaging with Asia by embracing the ‘opportunities that will be provided by the Asian Century’.[35]
The first round of negotiations for a bilateral trade agreement between Australia and Malaysia began in April 2005, with the last round taking place in February 2012.[36] MAFTA was signed on 22 May 2012 and is scheduled to take effect on 1 January 2013, once the two countries have undergone and completed their domestic ratification process.[37]
Tariffs
In terms of the provisions relating to tariffs (the custom duties levied on imported goods)[38], Malaysia has agreed to:
- not increase its tariffs on 99 per cent of Australian exports to that country
- eliminate tariffs at a higher and faster rate on certain products than under the ASEAN‑Australia‑NZ Free Trade Agreement (AANZFTA) and
- upon MAFTA coming into force, Malaysia will provide tariff free access to 94.8 per cent of tariff lines, which covers 96.7 per cent of Australia’s exports to that country.[39]
In terms of tariffs on specific exports, Malaysia will remove:
- almost all tariffs on car parts
- all tariffs on smaller cars by 2016
- almost all tariffs on plastics and chemicals
- tariffs on a range of processed food and manufactured products and
- tariffs on fruit.[40]
From the commencement of the MAFTA, Malaysia will exempt Australian cars from its global limit on imports.[41] In addition, Australian milk exporters will be granted additional quotas and Australian rice exporters will have open access to the Malaysian market from 2023 with all tariffs eliminated by 2026.
In return, all Australian tariffs on Malaysian imports will be eliminated upon MAFTA coming into force.[42]
Non-tariff measures
As discussed earlier, NTMs are measures other than tariffs that have an impact on the trade flow. Generally, NTMs are considered to include import quotas, import licensing, administration fees, export taxes and some domestic legislation, including legislation covering environmental and health standards.[43]
The Nation Interest Analysis (NIA) on MAFTA mentions that the NTMs imposed by Malaysia are ‘a matter of concern to a number of Australian industry sectors’[44], however, some concessions were achieved.[45] Upon MAFTA coming into force, Malaysia will remove quantitative restrictions on Australian cars and the licencing restrictions imposed on Australian milk exporters will be eased to allow for greater market access.[46]
Rules of origin
Rules of origin are rules that are used to establish where a good was produced in order to determine whether it is eligible to receive preferential tariff rates under a trade agreement.
Under MAFTA the rules of origin process will be simplified for Australian exporters who will be permitted to issue a ‘Declaration of Origin’ as part of a commercial invoice or company letterhead instead of having to obtain a third party ‘Certificate of Origin’.[47]
Services
MAFTA specifies that Australian companies will be allowed to own:
- up to 70 per cent of a Malaysian higher education institution, increasing to 100 per cent in 2015
- up to 70 per cent of a range of other education services
- up to 100 per cent of professional services companies such as accounting, auditing, bookkeeping and management consulting services
- up to 70 per cent share in any telecommunications company and
- majority ownership of up to 51 per cent in services including taxation, mining related services, tourism, travel and research and development (R&D).[48]
In return, Malaysian investors will benefit from ‘an increase in the Foreign Investment Review Board (FIRB) threshold for specific services below which Malaysians will be able to invest without having to submit to an FIRB assessment’.[49]
Skilled persons
MAFTA will allow Australians to have greater access to the Malaysian labour market by:
- increasing the number of Australian senior managers, business executives and experts who will be allowed to live and work in Malaysia
- providing a framework for the mutual recognition of qualifications, though this will be contingent on the development of Mutual Recognition Agreements
- allowing spouses and dependants of Australians working in Malaysia for periods longer than 12 months to stay, and in certain circumstances work, in Malaysia and
- expanding the definition of ‘business visitors’ (who are entitled to enter Malaysia and stay for a period of 90 days) to include goods sellers and investors.[50]
Australia will not need to implement any further changes regarding access to the labour market because it already provides this level of access to skilled persons coming from Malaysia.[51]
Financial incentives
According to a joint media release issued by the Prime Minister, Julia Gillard, and the Minister for Trade and Competitiveness, Dr Craig Emerson:
Australia has also agreed to provide a three-year package of up to 21 short and long-term scholarships, fellowships, awards and exchanges to support Malaysia's economic reform efforts.
This complements existing exchanges between Australia and Malaysia on public sector and economic governance, including through the Endeavour Scholarships.[52]
MAFTA also provides for enhanced economic and technical co-operation in sectors such as the automotive industry, agriculture, tourism and clean-coal technology.
In 2005, the Department of Foreign Affairs and Trade (DFAT) published the results of a scoping study which examined the impact a FTA with Malaysia would have on Australia.[53]
The report found that a FTA with Malaysia will benefit Australia and would increase the country’s GDP by $1.9 billion by 2027.[54] It also reported that trade between the two countries would be expected to significantly increase.[55] Specifically, it reported that in the long run Australia’s exports to Malaysia would be expected to increase by 5.5 per cent and Malaysia’s exports to Australia would increase by 6.3 per cent.[56]
In addition, the report argued that an agreement with Malaysia will provide a basis for the two countries to develop stronger relations and increase co-operation on issues including customs, sanitary and phytosanitary measures, investment, education, intellectual property and government procurement.[57]
Generally, the submissions received by DFAT from industry were supportive of the agreement.[58] In particular, the Federal Chamber of Automotive Industries (FCAI) stated that:
…Malaysia represents an important future trade partner in automotive products, both as a potential buyer of Australian-made vehicles and automotive components and as an ongoing competitive supplier of components and vehicles to Australia. [59]
Similarly, the Ford Motor Company submitted that a comprehensive free trade agreement with Malaysia that dealt with issues such as local content, import permits and excise taxes, could provide Australia with an opportunity to reduce its current trade imbalance.[60]
On December 2010 the Productivity Commission (the Commission) released its inquiry into the impact of Australia’s bilateral and regional trade agreements.[61]
In brief, the Commission found that:
- there was little evidence to suggest that Australia’s free trade agreements have resulted in significant benefits to businesses
- there was little net benefit to countries lowering their tariffs through bilateral trade agreements and instead, it would be in Australia’s interests to pursue multilateral liberalisation of trade and
- the feasibility studies in free trade agreements commissioned by DFAT tend to oversell the positive impacts the agreements will have on Australia’s economic welfare.[62]
The Commission made the following recommendations:
- the Government should only pursue bilateral and regional trade agreements where they are likely to have significant net economic benefits to Australia
- before entering into negotiations, the Government should commission an independent body to undertake a transparent analysis, based on realistic scenarios, to examine the potential impacts on Australia
- at the conclusion of the negotiations and before the signing of the agreement, the Government should commission an independent and transparent assessment of the final text of the agreement and
- transparency and public accountability regarding the negotiation of the agreements should be improved and DFAT should publish estimates of the cost involved in negotiating trade agreements.[63]
The Government agreed with the Commission’s recommendations[64], however, at this stage there does not appear to be any practical implementation of the recommendations.
A Regulatory Impact Statement (RIS) was prepared on MAFTA by DFAT[65], and assessed as adequate by the Office of Best Practice Regulation.[66] The purpose of the RIS was to examine whether it is in Australia’s interests to enter into MAFTA.[67]
The RIS examined the following factors[68]:
- trade barriers that currently exist between Australia and Malaysia[69]
- Australia’s overall negotiating objectives for MAFTA[70]
- the various negotiating pathways Australia could have chosen for negotiating with Malaysia[71]
- what impact MAFTA will have on both Australia’s and Malaysia’s domestic economies[72] and
- what impact MAFTA will have on trade between Australia and Malaysia.[73]
In recommending that it is beneficial to Australia’s interests to enter into MAFTA, the RIS listed a number of reasons[74], including that MAFTA will:
- deliver significant market access commitments that will provide benefits to Australian producers, exporters, consumers and investors and a platform for securing continuing trade and investment liberalisation in the future
- substantially build on AANZFTA commitments and ensure that MAFTA is supportive of regional economic integration and
- strengthen Australia’s economic and strategic engagement with Malaysia, thereby contributing to Australia’s broader engagement with the Asia-Pacific region.[75]
The RIS also stated that MAFTA would ‘not detract from our ability to continue to negotiate trade liberalisation through the WTO, or through other regional or bilateral agreements’.[76]
Upon being tabled in Parliament, international agreements are typically accompanied by a NIA which explains the impact the proposed agreement will have on Australia. In particular, the purpose of the NIA is to look at the potential economic, social, cultural, environmental and legal impacts that the agreement will have on Australia’s interests. Accordingly, a NIA was prepared in regards to MAFTA.[77]
The NIA concluded that, due to the following reasons, Australia will benefit by entering into a free trade agreement with Malaysia:
- Australia’s economy will be further integrated into the region and its trade and investment linkages will become stronger. The deepening of Australia’s engagement with the region is expected to support Australia’s efforts into further trade liberalisation in the Asia-Pacific
- there will be greater certainty for Australian exporters and investors through the commitments on goods and services market access and the temporary movement of skilled personnel and
- there will also be an improvement in transparency and predictability of the regulatory regime through consultation and cooperation between the parties.[78]
However, as was pointed out by JSCOT in its review of MAFTA, the NIA it does not provide an analysis of the social impacts of MAFTA and provides ‘very little tangible financial analysis.’[79]
The Joint Standing Committee of Treaties (JSCOT) is responsible for enquiring and reporting on every international agreement which Australia is considering entering. The purpose of the Committee’s report is to evaluate any issues that may arise from the signing of the agreement and ensure that it will be in Australia’s interest to enter into such an agreement. On 31 October 2012 JSCOT tabled its report into MAFTA.[80]
The Committee identified the following four key issues with MAFTA:
- overlapping treaty commitments
- ‘Certificate of Origin’ versus ‘Declaration of Origin’ documentation
- the non-inclusion of environmental and labour standards and
- employment outcomes in Australia.[81]
Overlapping treaty commitments
Participants in the inquiry raised questions about the need for Australia to be part of three different agreements with Malaysia, namely MAFTA, the ASEAN-Australia-New Zealand FTA (AANZFTA) and the currently under negotiation Trans Pacific Partnership Agreement (TPP). Of particular interest to the participants was how the three agreements will operate with each other in practice.
In its response to these concerns, DFAT argued that the agreements have been designed to co-exist and provide flexibility to the private sector by giving them the choice to select which trade agreement they wish to operate under, depending on the agreed terms contained in each agreement.[82] However, the issue of how the private sector is to digest and have the resources and knowledge to be able to compare and choose from which of the growing number of FTAs to operate under, so as to optimally serve their business interests, is left unresolved in the JSCOT report.
‘Certificate of Origin’ versus ‘Declaration of Origin’ documentation
Under MAFTA, eligible Australian exporters will be permitted to issue a ‘Declaration of Origin’ as part of their invoice or company letterhead instead of been required to obtain a ‘Certificate of Origin’ from a third party. The ‘Declaration of Origin’ option is only available to Australian exporters; Malaysian exporters will still have to go through a third party in order to obtain a ‘Certificate of Origin’.
The Australian Chamber of Commerce and Industry (ACCI) expressed concerns that the use by Australian exporters of a ‘Declaration of Origin’ documentation instead of the more widely accepted ‘Certificate of Origin’ deviates from the international standard of export and may ‘increase the risk, complexity and cost of doing trade with Malaysia.’[83]
This view was not held by all participants in the inquiry. The Australian Dairy Industry, represented by the Australian Dairy Industry Inc. and Dairy Australia, argued that the ‘Declaration of Origin’ documentation is a simplification to the current system and will reduce the industry’s administrative overheads.[84]
DFAT was also of the view that the rules of origin terms lessen the burden on Australian exporters, arguing that other countries, even within ASEAN, are moving towards the use of the ‘Declaration of Origin’.[85] DFAT also pointed out that Australia is already using this system of export negotiation as part of the Australia-Chile FTA and has experienced fewer issues with its implementation than is the case under the ‘Certificate of Origin’ system.[86]
Non-inclusion of environmental and labour standards
Concerns were raised by the Australian Council of Trade Unions (ACTU)[87] and Australian Fair Trade and Investment (AFTINET)[88], regarding the non-inclusion of labour and environmental standards in the main body of MAFTA. In particular, AFTINET stated that:
…all trade agreements should contain a labour rights chapter which commits the parties to implement fundamental rights at work as expressed in ILO conventions, includes commitments to improve, not weaken, labour rights, and provides mechanisms for monitoring and enforcement of labour rights, including access to the government-to-government disputes settlement process of the agreement.
Environment chapters should include commitments by the parties to implement relevant United Nations environmental agreements, to improve, not weaken, national environmental protections and include mechanisms for enforcement of environmental protections, including access to government-to-government disputes settlement processes of the agreement…
In the absence of enforceable labour rights and environmental protections, rapid trade liberalisation intensifies competition and can lead to a race to the bottom on labour rights and environmental standards. [89]
A very different view was expressed by CPA Australia (CPA):
…there are more appropriate international forums in place where discussions related to labour and the environment can take place. Trade treaties should be singularly focused on facilitating growth in international trade. The introduction of peripheral non-trade issues can only undermine this objective.
Furthermore, where there are genuine concerns over possible environmental impacts arising from international trade, the World Trade Organisation’s General Agreement on Tariffs and Trade (GATT) and the General Agreement on Trade in Services (GATS), both of which Australia and Malaysia are signatories to, already provide appropriate and sufficient environmental protections under the General Exceptions provisions. As such, CPA Australia considers that the attempt to introduce labour and environment provisions into Australia’s trade treaties is an entirely unwelcome development.[90]
DFAT argued that it had pursued the issue:
…but Malaysia pointed out that it has not included labour provisions in any of its other trade agreements…
…
Malaysia concluded that it could not agree to include labour provisions in the MAFTA treaty text at this point in time, because of concerns that it had about possible duplication and conflicting commitments with possible TPP outcomes on those issues. So Malaysia suggested the side letter approach. [91]
Documents such as annexures and side letters may also form part of a FTA. Side letters may constitute part of the agreement, be stand-alone instruments that are legally binding or they may have no legal standing.[92] While DFAT argued that the side letters on labour and environmental standards are an integral part of the agreement[93], JSCOT re-iterated its position that such standards should be included in the main body of future agreements.[94]
As stated by the Chair of JSCOT, Mr Kelvin Thompson:
If you have imports that are being made by companies that aren't observing proper labour standards or proper environmental standards and they're cheaper than the local manufacture, they could enjoy an unfair advantage and provide an incentive for poor labour standards and poor environmental standards in Australia and we don't want to see that. We want to see standards being maintained and indeed lifted right around the world.[95]
Other sources outside of those who provided submissions to JSCOT have also commented on this issue. Since 2007, the Organisation for Economic Cooperation and Development (OECD) Joint Working Party on Trade and Environment (JWPTE) has been analysing the way in which the increasing number of bilateral and regional trade agreements (RTAs) deal with environmental issues. Interestingly, a report from a recent OECD workshop titled ‘Regional Trade Agreements and the Environment: Monitoring Implementation and Assessing Impacts’[96] seems to take a perspective that is more in line with that of the ACTU. The report from this workshop concluded:
…that RTAs had been fairly effective in building confidence in trade and environment-related commitments. They have enhanced co-operation in environmental matters of shared interest, acted as a driver for reforms, and created obligations for both co-operation and stronger environmental legislation…
It was also felt that RTAs offer a way forward on trade and the environment, but not necessarily in a way that can move back into the WTO negotiations. The smaller number of parties in RTAs allows achievements that are more difficult in the multilateral arena. It was suggested that a parallel process may be appropriate, with the WTO addressing big issues such as subsidies, and RTAs taking more practical action. However, small countries struggle to cope with all the different negotiations and standards at the WTO, regional and local levels.
It was generally felt that a great deal more could be done to ensure that RTAs contribute to green growth…[it was also suggested] that sustainable development priorities should have a direct influence on trade policy.[97]
Employment outcomes in Australia
The final major issue identified in the JSCOT’s report related to the concerns MAFTA will have on Australian jobs, especially in the manufacturing sector.[98] According to the Construction, Forestry, Mining and Energy Union of Australia (CFMEU):
There is real potential of manufacturing job losses and the loss of diversified capacity in the economy as a result of this agreement according to initial analysis from the CFMEU. The National Interest Analysis (NIA) and Regulation Impact Statement (RIS) tabled in parliament with MAFTA do not adequately consider this or the negative impact on workers, their families and their communities…[99]
DFAT responded to these concerns by arguing that it was difficult to examine the impact FTAs have on manufacturing jobs given the structural changes Australia’s economy is going through, the impact of the high Australian dollar and the current financial crisis.[100] It is unclear whether DFAT has considered the extent to which such structural changes may have been influenced by the cumulative impact of FTAs that Australia has already concluded, or application of trade liberalisation principles in general.
In its report JSCOT mentioned the role of DFAT staff in negotiating free-trade agreements.[101] In particular, the Committee raised concerns about the concessions being made by Australian negotiators without a meaningful trade-off made by the other party.[102]
The Committee stated:
As this issue of trade-offs goes to the heat of employment outcomes in Australia…the Committee would like to remind Australian negotiators of the practical impact free trade negotiations have on ordinary Australians’ lives- particularly with respect to employment.[103]
Recommendations
In concluding, JSCOT offered its broad support for MAFTA[104], but recommended that in the future, agreements must be reviewed and analysed by an independent body so that their social and economic impact on Australia is accurately assessed.[105] In particular, JSCOT recommended:
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That prior to commencing negotiations for a new agreement, the Government table in Parliament a document setting out its priorities and objectives including independent analysis of the anticipated costs and benefits of the agreement. Such analysis should be reflected in the National Interest Analysis accompanying the treaty text.[106]
This recommendation follows on from previous requests made by JSCOT for the provision of more tangible analysis with respect to FTAs.[107]
JSCOT also recommended:
That after 24 months of the treaty [MAFTA] coming into effect, an independent review of MAFTA be conducted to assess actual outcomes of the treaty against the claimed benefits and potential negative consequences noted in this report. The review should consider the economic, regional, social, cultural, regulatory, labour and environmental impacts. Such a review should serve as a model for future free trade agreements.[108]
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Selection of Bills
At its meeting on the 19 November 2012, the Senate Selection of Bills Committee determined that the Bill not be referred to any committee for inquiry and report.[109]
Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee) raised concerns regarding whether the delegated powers set out in the Bill are appropriate:
The bill requires a number of matters be dealt with in the regulations, though the explanatory memorandum does not detail the reasons why the terms of the MAFTA cannot be adequately reflected in the primary legislation. The Committee therefore seeks a general explanation for the reliance on regulation making powers within the bill, and in particular (1) why it is necessary for the regulations to incorporate adopt or apply any matter contained in an instrument or other writing as in force or existing from time to time (see proposed subsection 153ZLB(6), introduced by item 1 of Schedule 1), and (2) why the record keeping obligations required by MAFTA are to be dealt with in regulations as opposed to the primary legislation (see proposed section 126ALB, item 2 of schedule 1).[110]
The Scrutiny of Bills Committee concluded:
Pending the Minister’s response, the Committee draws Senators’ attention to the provisions, as they may be considered to delegate legislative powers inappropriately.[111]
Human Rights Committee
The Parliamentary Joint Committee on Human Rights has yet to report on this Bill.
Coalition
A dissenting report was not prepared by the Liberal and National party members who sit on JSCOT, apparently indicating that the Coalition agrees with the recommendations made in JSCOT’s report.[112]
Australian Greens
The Australian Greens have said that MAFTA should not go ahead without an independent and thorough analysis of the social and economic impacts it will have on Australia. In their dissenting report to the JSCOT report, Senator Scott Ludlam, on behalf of the party, expressed concern that trade agreements are ‘being used as tools of diplomacy at the expense of the consideration of the economic, social and environmental impacts’.[113] The dissenting report concluded that ‘enhanced transparency of negotiations and independent analysis would allow informed debate about whether these trade-offs are in Australia’s interest’.[114]
Australian Council of Trade Unions
The ACTU’s submission to JSCOT expressed concern over the decision not to include a chapter on labour standards in MAFTA.[115] In particular, it stated that:
…trade agreements to which Australia is a party must include an enforceable chapter on workers’ rights. The failure to include such provisions in MAFTA leaves labour relations with respect to trade between the two countries unregulated and provides no avenue to address labour rights violations as they arise. This is inconsistent with a commitment to ensuring the benefits of trade are fairly distributed. We recommend that the Committee question the rationale for side letters rather than a comprehensive labour chapter.[116]
Construction, Forestry, Mining and Energy Union of Australia
The CFMEU also made a submission to JSCOT, in which it was generally critical of MAFTA[117]. In particular, the CFMEU criticised the lack of transparency in trade negotiations and pointed out that there was a ‘gap between apparent objectives and actual outcomes of Australia’s trade policy and strategy’.[118]
The CFMEU also raised concerns regarding Australia’s agreement with Malaysia being used as a gateway for other countries in the region:
Wide spread abuse of rules of origin (RoO) requirements and misuse of free trade agreements to receive tariff free entry into Australia has been a devastating result of Australia’s bilateral agreements entered into in the past. In this context the RoO requirements in MAFTA provide little comfort.[119]
Federal Chamber of Automotive Industries
In its submission to JSCOT, the FCAI expressed concerns that the non-tariff barriers and local content rules that are in place in Malaysia will make Australian built cars uncompetitive when sold in Malaysia.[120] The FCAI expressed a belief that under MAFTA the number of Malaysian car imports to Australia will increase significantly because of the elimination of tariffs.[121]
Australian Chamber of Commerce and Industry
The ACCI has been seen as being supportive of MAFTA[122], with its Director of Trade and International Affairs, Bryan Clark, stating that MAFTA:
…is broadly based with benefits for the agricultural sector as well as automotive, iron and steel industries. The services sector will see benefits for education, financial, telecommunication and other professional services. The agreement also covers improvements in visa access for some people and improved access for Australians working in Malaysia.[123]
CPA Australia
CPA Australia also supported MAFTA and in particular its market access outcomes, including the increased rights by Australian companies to become majority owners in Malaysian services industries such as accounting, audit and bookkeeping.[124]
Dairy Australia
Dairy Australia’s submission to JSCOT was generally supportive of MAFTA, noting that:
… while there had previously been low, or no tariffs, on most dairy products under the pre-existing ASEAN Australia New Zealand Free Trade Area (AANZFTA) the signing of the new FTA agreement with Malaysia provides additional quota for liquid milk, and will potentially allow for new (albeit limited) opportunities for the export of drinking milk retail packs.[125]
As stated in the Explanatory Memorandum[126]:
There will be no net impact on the Budget from the implementation of MAFTA from 1 January 2013 as the 2012-13 Budget included a provision for the treaty. MAFTA is anticipated to reduce tariff revenue by $80 million over the forward estimates.[127]
A number of the issues that have been raised with respect to MAFTA apply to FTAs in general, and the way in which Australia goes about negotiating such agreements.
Free Trade Agreements and the WTO
One of the key principles of the WTO’s trading system is what is known as the most-favoured nation (MFN) treatment, which means that all states must be treated equally:
Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.[128]
This principle is considered to be crucial to the work of the WTO[129] and is therefore set out under Article 1 of the General Agreement on Tariffs and Trade (GATT)[130], as well as being specified in the General Agreement on Trade in Services (GATS)[131] and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).[132] Prima facie, it would appear that FTAs would clearly not comply with this principle, due to the use of trade diversion resulting from FTAs. Trade diversion occurs when a country chooses to trade with a partner country because of its preferential or zero-tariff status under the FTA, rather than because of their efficient production or price of inputs.[133]
However, under Article XXIV of the GATT and Article V of the GATS, free trade agreements are excluded from having to comply with MFN treatment:
Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods traded within the group— discriminating against goods from outside. Or they can give developing countries special access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions.[134] In general, MFN means that every time a country lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading partners— whether rich or poor, weak or strong.[135]
As noted in the JSCOT report[136], as of 15 January 2012, some 511 notifications of FTAs (counting goods and services separately) had been received by the GATT/WTO, with 319 of these in force.[137]
Negotiation of Free Trade Agreements
Transparency
Since the stalling of the DOHA Round and the rise in FTAs, there has been some debate regarding the nature of negotiations and the need for further transparency.
In her paper examining the need for secrecy in the negotiation of treaties[138], Barbara Koremenos argues that this notion is one being supported by governments and diplomats, as opposed to the public:
Transparency is intimately connected to our notion of democracy. Many believe that democracy is threatened when there is a large separation between the people and their government. Constructive debate about public policy issues is precluded, and the public can be more easily manipulated with false arguments.[139]
She ultimately takes a different opinion and concludes that secrecy in treaty negotiations is preferred, and often achieves better social outcomes than open treaty negotiations as interests groups have less opportunity for sabotage:
With transparency, each group in a democracy knows exactly what is being brought to the bargaining table and can mobilize support against a negotiator if the treaty being designed either disfavors it or doesn’t favor it as much as is possible. Through mobilization, the group can influence the treaty design to be consistent with its (usually) extreme preferences. When multiple groups do this, they reach a collectively irrational equilibrium because many resources are spent in the competition to win influence, and the resulting extreme treaty rarely survives; hence society is worse off. Open treaty negotiations often make it impossible to achieve outcomes with net benefits from a social welfare point of view, and, in some cases, transparency even precludes Pareto-improving outcomes.[140]
This type of reasoning is not supported by JSCOT and the Commission.[141]
JSCOT has consistently argued the need for further analysis with regards to FTAs.[142] As stated by the Chair, Kelvin Thomson:
We think that if there [are] various costs and benefits at stake that the government should be able to have those independently looked at and to tell the Australian community what its intentions are and so that people can see what the likely outcomes are in terms of Free Trade Agreements, rather than simply being presented with them as a fait accompli.[143]
This view was also shared by Senator Ludlam:
The Australian Greens agree with this approach and call for greater transparency of negotiated outcomes, so the implications of free trade agreements can be appropriately debated by the Australian parliament and community.[144]
Transparency and community consultation in such agreements would not be considered an unreasonable expectation where a government has provided an explicit undertaking that it remains committed to an open and transparent treaty-making process.[145]
Use of FTAs
Lack of transparency also gives rise to concerns about how decisions regarding trade negotiations are made. The Commission has been highly critical of the benefits Australia has so far received from FTAs[146], and Michael Priestly, in his background note on Australia’s FTAs, has raised concerns regarding the use of FTAs:
Research suggests that FTAs offer little in the way of trade liberalisation and a shift to more liberal trade policies, particularly in agricultural trade. Rather, FTAs are used more often to promote other non-economic, diplomatic and regional interests.[147]
In his second reading speech[148], the Minister for Home Affairs, Justice and Defence Materiel, Jason Clare, commented on the advantages of an FTA with Malaysia:
This government has a strong history of supporting free trade. Free trade is good for our economy, good for manufacturers, good for importers and exporters and good for our region. These amendments come to the parliament at an opportune time with the government's recent release of the Asian century white paper. The white paper is ambitious—it makes clear the importance of building our ties with Asia. Implementation of the Malaysia Australia Free Trade Agreement (MAFTA) is an important step in this regard.[149]
He further commented:
Malaysia is an important market for Australia. At present Malaysia is Australia's 10th largest trading partner, with two-way trade worth $16 billion in 2011.[150]
It would appear that the main reasons for Australia entering into MAFTA are to promote diplomatic interests in the region, as opposed to great economic advantages. Upon the signing of MAFTA, The Australian reported that the agreement was likely to be well received by Australian businesses and might establish some good will for the Government in the follow-on from its decisions regarding the carbon and mining taxes, and the company tax rate.[151] There was also some suggestion that ‘the pact may also remove any lingering awkwardness between the two countries over the failed attempt at installing a "Malaysia Solution" for people-smuggling’[152], and might prove advantageous for the Malaysian Prime Minister, Najib Razak, who is facing an upcoming election.[153] However, none of these factors could have been contemplated when the decision was originally made to enter into agreements with Malaysia.[154]
The Australian also detailed the advantages of entering into an FTA with Malaysia:
The deal will provide Australian companies with better access to a successful Asian economy with a population of 28 million; a large, well-educated middle class; average personal income of about $10,150 a year and gross domestic product forecast by the International Monetary Fund to keep growing at an annual rate of more than 5 per cent.[155]
While FTAs have been considered to be ‘second best’ trade policy following the collapse of the Doha negotiations[156], they often prove advantageous to governments, compared with multilateral agreements:
A rule of thumb in the politics of visibility is that bilateral gatherings generate better publicity than they deserve, while global gatherings generate worse publicity than they deserve. The significance of bilateral meetings is often exaggerated and their benefits are more apparent than real (witness the Australian-US Free Trade Agreement). In contrast, the negative publicity about global meetings and the chorus of criticisms surrounding them often mask the (always limited and sometimes disappointingly small) progress they achieve.[157]
While some countries’ trade arrangements have thrived from the use of FTAs, such as the United States, the benefits that Australia has received under FTAs have been heavily criticised:
The potential risks of the current FTA model adopted by Australia are clear: structural trade imbalances leading to higher trade deficits favouring the FTA partner country, long phase-in periods for free trade (in particular agricultural trade), and negative impacts on the Australian economy which are related to trade diversion.
The anticipated gains for Australian exporters have fallen well short of estimates. Given the growing importance of FTAs in the Asia-Pacific economy, policymakers need to evaluate FTA models and their importance relative to the region’s most significant multilateral project, APEC [Asia-Pacific Economic Cooperation].[158]
Administrative changes
There have also been concerns raised in regards to the changes to the rules of origin process, and how MAFTA will operate alongside Australia’s other trade agreements.
Bryan Mercurio, in his article examining whether Australia should continue with free-trade agreements[159], states:
Each bilateral or regional FTA contains different conditions and obligations which can sometimes lead to confusing or even conflicting obligations. The differing standards and rules can create obstacles to trade facilitation by increasing administrative complexity at customs and creating a ‘web’ of differing rules. This is a major source of concern for the international trading community.[160]
He pays special note to what occurs with regards to rules of origin requirements:
Rules of origin are designed to prevent a product being exported from a non-member country to a member country before being re-exported to, and gaining the reduced tariff rate in, another member country. To guard against such abuse, FTAs contain some form of a ‘rules of origin’ requirement. This requires that a minimum level of value-added creation must occur in a member country to the FTA before the preferential tariffs or access is granted. The problem is that the standard differs between FTAs and the sometimes arbitrary definitions of which product comes from where, and what constitutes local added value. This results in a multiplicity of tariffs depending on the source, which are extra business costs and detrimental to FTAs.[161]
As discussed earlier, the ACCI has argued that changes to the documentation requirements for Australian exports would lead to confusion for exporters looking to trade with Malaysia.[162] However, the Government is of the view that moving from a certificate of origin to a declaration of origin will simplify the rules of origin requirements for Australian exporters.[163] The Trade Minister, Dr Craig Emerson, had stated that MAFTA would ‘not add to the noodle bowl of complexity, or to the trade diversion that has made some past bilateral deals onerous to access, and less beneficial’ for Australia.[164] DFAT has also argued in its submission to JSCOT that ‘we have experienced far more problems with ‘Certificates of origin’ than we have with ‘Declarations of origin’.[165] While JSCOT did not comment on the likelihood of confusion arising out of the two approaches to calculating whether non-originating materials have met the rules of origin test, there is a possibility that these changes will also prove challenging to exporters.
Concerns have also been raised with regards to the potential overlap in Australia’s free trade agreements.
The WTO has stated that:
Overlapping free trade agreements tend to generate a system of coexisting different trade rules in a single country, hampering trade as a result of the costs to exporters of negotiating these coexisting rules.[166]
While DFAT has argued that the existence of MAFTA, AANZFTA and the TPP will result in more flexibility for exporters[167], there is likely to be some confusion until further clarification is provided as to how all the agreements will interact. DFAT has commented that they are ‘seeking to achieve as much consistency and coherence across all these FTAs as possible…’[168]
Appropriate delegation of powers
As has been stated earlier, the Scrutiny of Bills Committee has expressed concern that the provisions of the Bill result in an inappropriate use of delegated powers.[169] It is not uncommon for a Bill to provide for the delegation of power, with regulations being the primary form of delegated legislation.[170]
As stated in Odgers’ Australian Senate Practice:
The essential theory of delegated legislation is that while the Parliament deals directly with general principles, the executive, or other body empowered to make subordinate legislation, attends to matters of administration and detail.[171]
…
Other justifications for the use of delegated legislation include reducing pressure on parliamentary time, and allowing legislation to be made so as to accommodate rapidly changing or uncertain situations, or cases of emergency.[172]
While the use of delegated legislation is not uncommon, it is unclear why the Government has left certain provisions to the regulations, as opposed to prescribing them in the primary legislation. As the Bill designates that the rules of origin with regards to non-originating materials and the relevant record keeping obligations are to be left to regulations, it might appear that this has been deliberately crafted. This might be due to the possibility that other countries may try to use MAFTA as a way of circumventing the tariffs Australia has imposed in respect of their countries and the Government wishes to make it easier to amend the legislation to prevent this happening. As the Explanatory Memorandum remains silent, the Government’s intent is unclear.
The Bill is divided into two schedules:
- Schedule 1 of the Bill sets out the various amendments to the Customs Act which are required in order to give effect to MAFTA and
- Schedule 2 of the Bill corrects a number of misdescribed amendments contained in the NZ Rules of Origin Act.
Schedule 1 of the Bill is divided into three Parts:
- Part 1 of the Bill sets out the rules for determining whether goods can be considered Malaysian originating goods
- Part 2 of the Bill prescribes what record keeping obligations must be complied with and gives Australian and Malaysian customs officials powers in regards to verifying the origin of goods and
- Part 3 of the Bill contains the various application provisions.
Item 1 of Schedule1 of the Bill inserts Division 1H into Part VIII of the Customs Act. The purpose of proposed Division 1H of the Bill is to define when goods are considered to be ‘Malaysian originating goods’ and are therefore compliant with the rules of origin. Goods that satisfy the rules of origin are eligible to receive preferential rates of duty when they enter Australia.
Proposed Division 1H of the Bill is split up into six subdivisions (A-F). Proposed subdivision A sets out the relevant preliminary provisions, whilst proposed subdivisions B-F provide for the different circumstances when goods will be considered Malaysian originating goods.
The following types of goods may be considered to be Malaysian originating goods[173]:
- goods wholly obtained or produced in Malaysia or in Malaysia and Australia
- goods produced in Malaysia, or in Malaysia and Australia, from originating materials
- goods produced in Malaysia, or in Malaysia and Australia, from non-originating materials and
- goods that are accessories, spare parts, tools or instructional or other information materials relating to Malaysian originating goods.
An important distinction is drawn between originating materials and non-originating materials.
Proposed subsection 153ZLB(1), of the Bill which sets out the various definitions under Division 1H, states that originating materials include:
- Malaysian originating goods that are used in the production of other goods
- Australian originating goods that are used in the production of other goods or
- indirect materials.[174]
In basic terms, originating materials are those materials that either originate in Australia or Malaysia, and are then used to make other goods. An example is set out the in Explanatory Memorandum:
…where frozen crumbed fish fillets are made in Malaysia from fish caught in Malaysia, coated with herbs and spices imported from Thailand, the fish would be originating materials and the herbs and spices would be non-originating materials.[175]
Whether or not goods will be classed as Malaysian originating goods will depend on whether the conditions specified in proposed Division 1H have been complied with.
Goods wholly obtained or produced in Malaysia or in Malaysia and Australia
Under proposed subdivision B of proposed Division 1H, goods are classified as Malaysian originating goods where:
- they are wholly obtained or produced in Malaysia or in Malaysia and Australia[176] and
- the importer of the goods has, at the time the goods are imported, an original or copy of a Certificate of Origin or Declaration of Origin for the goods.
Goods produced in Malaysia, or in Malaysia and Australia, from originating materials
Under proposed subdivision C of proposed Division 1H, goods are classified as Malaysian originating goods where:
- they are produced entirely in the territory of Malaysia, or entirely in the territory of Malaysia and the territory of Australia, from originating materials only and
- the importer of the goods has, at the time the goods are imported, an original or copy of a Certificate of Origin or Declaration of Origin for the goods.
Goods produced in Malaysia, or in Malaysia and Australia, from non‑originating materials
Under proposed subdivision D of proposed Division 1H, goods are classified as Malaysian originating goods where:
- they are classified under a heading or subheading to the Harmonized System and
- they are produced entirely in the territory of Malaysia, or entirely in the territory of Malaysia and the territory of Australia from non-originating materials only or from non-originating materials and originating materials
- the goods comply with the requirements prescribed under the regulations and
- the importer of the goods has, at the time the goods are imported, an original or a copy of a Certificate of Origin or Declaration of Origin for the goods.
The Harmonized System (HS) was established under the International Convention on the Harmonized Commodity Description and Coding System, done at Brussels on 14 June 1983 (the Convention).[177] A description of the HS is set out in the Explanatory Memorandum:
The Harmonized System (HS) is the worldwide classification system that has been adopted by all countries that are members of the World Customs Organization. In Australia, the HS has been adopted in the Customs Tariff Act. The HS organises goods according to the degree of manufacture, and assigns classification numbers to all goods. It is arranged into 97 chapters covering all goods, and each chapter is divided into headings, subheadings, and tariff classifications. Under the HS, the chapter, heading, and subheading numbers (6 digits) for any good are adopted in any country using the HS. The Australian Customs Tariff is an 8 digit classification, with the 4 and 6 digit international classification supplemented for the domestic imposition of customs duty.[178]
Proposed subsection 153ZLE(1)(a) of the Bill provides that Schedule 1 of the Regulations will incorporate the rules of origin that goods are required to meet in order to be considered Malaysian originating goods. Proposed subsection 153ZLB(6) of the Bill allows for the Regulations to refer to the Convention without breaching subsection 14(2) of the Legislative Instruments Act 2003.[179]
Under proposed subdivision D, there are two methods that can be used to determine whether goods produced in Malaysia, or in Malaysia and Australia, from non-originating materials have met the rules of origin test. Proposed subsections 153ZLE(2)-153ZLE(5) introduce the Change in Tariff Classification Method (CTC), while proposed subsections 153ZLE(6)-153ZLE(9) set out the Regional Value Content (RVC) approach.[180]
An explanation of the two approaches was included in JSCOT’s report:
The Change in Tariff Classification Method defines a good that is produced using elements that come from another country as originating in the exporter’s country when the production process results in a change in the tariff classification that applies to the good. In other words, the production process results in sufficient change in the good for it to be considered something different under the agreement’s classification system.
The Regional Value Content approach uses an equation to determine the value of the work carried out on a product in the exporter’s country as a percentage of the total value of the product. If the percentage is higher than the regional value content applying to that product, the exporter will be able to avail themselves of any preferential tariff treatment available under the free trade agreement.
In addition to the option of which rule of origin to use, exporters may also choose which of the two applicable agreements, the AANZFTA or MAFTA, to apply to a particular transaction.[181]
Proposed section 153ZLF of the Bill sets out the approach to be taken to packaging materials and containers are used in the shipping of goods produced in Malaysia, or in Malaysia and Australia. In general, the packaging materials are to be disregarded in determining whether a packaged good is of Malaysian origin.
Proposed section 153ZLG of the Bill provides that goods will not be considered Malaysian originating goods just because one of the following, or a combination of the following, operations has been performed in Malaysia, or in Malaysia and Australia:
- operations to preserve goods in good condition for the purpose of transport or storage of the goods
- operations to facilitate the shipment or transportation of goods
- disassembly of goods
- affixing of marks, labels or other distinguishing signs on goods or on their packaging
- placing goods in bottles, cases or boxes or other simple packaging operations
- changing of packaging or the breaking up or assembly of packages and
- the reclassification of goods without any physical change in the goods.
Goods that are accessories, spare parts, tools or instructional or other information materials
Under proposed subdivision E, goods are classified as Malaysian originating goods where:
- they are accessories, spare parts, tools or instructional or other information materials in relation to other goods
- the other goods are imported into Australia with the accessories, spare parts, tools or instructional or other information materials
- the other goods are Malaysian originating goods (as set out in subdivisions B-D)
- the accessories, spare parts, tools or instructional or other information materials are not invoiced separately from the other goods and
- the quantities and value of the accessories, spare parts, tools or instructional or other information materials are customary for the other goods.
Proposed subdivision F of proposed Division 1Hsets out the requirements with regards to consignment. Consignment means ‘the delivery of goods as cargo for delivery or sale’.[182] Under proposed section 153ZLI(1), goods will not be considered to be Malaysian originating goods where:
- they are transported through a country or place other than Malaysia or Australia and
- they undergo subsequent production or any other operation in that country or place (other than unloading, reloading, storing, repacking, relabelling, exhibition or any operation that is necessary to preserve them in good condition or to transport them to Australia).
Proposed section 153ZLI(2) of the Bill provides that even where goods are classified as Malaysian originating goods under subdivisions B-F, if they do not comply with proposed 153ZLI(2), then they are not considered Malaysian originating goods.
Item 2 of the Schedule 1 to the Bill inserts Division 4F into the Part VI of the Customs Act. The purpose of proposed Division 4F is to set out the relevant record keeping obligations that must be complied with and give Customs officials various powers with regards to overseeing compliance.
Record keeping obligations
Proposed subsection 126ALB(1) of the Customs Act states that the regulations will prescribe the relevant record keeping obligations that apply in relation to goods that are exported to Malaysia and claim to be Australian originating goods for the purpose of obtaining preferential rates of duty upon entering Malaysia. Proposed subsection 126ALB(2) of the Bill provides that the regulations may impose record keeping requirements on either the exporter or producer of the goods.
Power to require records
Under proposed subsection 126ALC(1) of the Customs Act, an authorised officer[183] may require a person who is subject to the record keeping obligations prescribed under the regulations to provide such records to the officer. Reference is made to certain provisions in Division 4 of Part XIII of the Customs Act, which relate to certain strict liability offences. In particular, section 243SB provides that failing to provide records as required under the Customs Act may be considered an offence, however, under section 243SC, a person does not have to produce records when doing so may incriminate them.
Proposed subsection 126ALC(2) of the Customs Act provides that the officer may disclose any records produced to the officer under subsection 126ALC(1), to an Malaysian customs official, for the purpose of verifying that goods being exported are Malaysian origin goods.
Power to ask questions
Proposed subsection 126ALD(1) of the Customs Act gives an authorised officer the power to require an exporter of producer of goods being exported to Malaysia, who wishes to take advantage of the preferential tariffs, to answer questions regarding the origin of the goods. Similar provisions to those set out in proposed section 126ALC regarding strict liability offences and the provision of material to Malaysian Customs officials, are also contained in proposed section 126ALD.[184]
Items 1-5 of Schedule 2 to the Bill amend provisions in the Customs Act and the NZ Rules of Origin Act that were misdescribed as a result of the delayed passage of the NZ Rules of Origin Act.[185]
Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.
[1]. As MAFTA is scheduled to come into force on 1 January 2013, it is important for the Government that this Bill and the Customs Amendment Bill be passed this year.
[8]. PH Butt and D Hamer, eds., LexisNexis Concise Australian Legal Dictionary, fourth edn., LexisNexis Butterworths, Chatswood, 2011, p. 387.
[12]. The Doha Round is the current round of negotiations amongst the WTO members, which commenced in 2001 and stalled in 2008. Further information is set out on the WTO website: World Trade Organisation (WTO), ‘The Doha Round’, website, 2012, viewed 20 November 2012, http://www.wto.org/english/tratop_e/dda_e/dda_e.htm
[14]. Information about each of Australia’s trade agreements is set out on the Department of Foreign Affairs and Trade’s (DFAT) website: Department of Foreign Affairs and Trade (DFAT), ‘About free trade agreements’, website, viewed 12 November 2012, http://www.dfat.gov.au/fta/
[20]. A country’s GDP is ‘the total value of goods produced and services provided within a country during one year’: A Stevenson and M Waite eds., Concise Oxford Legal Dictionary, twelfth edn., Oxford University Press, Oxford, 2011, p. 628.
[25]. WTO, Trade and public policies: a closer look at non-tariff measures in the 21st century, op. cit., p. 4.
[27]. Sanitary and phytosanitary measures ‘deal with food safety and animal and plant health. They aim to ensure that a country’s consumers are being supplied with food that is safe to eat — by acceptable standards — while also ensuring that strict health and safety regulations are not being used as an excuse to shield domestic producers from competition’: World Trade Organisation (WTO), ‘Current issues in SPS’, website, 2012, viewed 20 November 2012, http://www.wto.org/english/tratop_e/sps_e/sps_issues_e.htm
[33]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. 6.
[36]. The DFAT website sets out information with regards to the negotiation process (including updates): Department of Foreign Affairs and Trade (DFAT), ‘Malaysia-Australia Free Trade Agreement’, website, viewed 12 November 2012, http://www.dfat.gov.au/fta/mafta/index.html
[37]. Detailed information on MAFTA, including official documentation, is also available on DFAT’s website: ibid.
[39]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. 8.
[44]. National Interest Analysis, Malaysia-Australia Free Trade Agreement, op. cit.
[54]. Department of Foreign Affairs and Trade (DFAT), An Australia-Malaysia Free Trade Agreement: Australian Scoping Study, op. cit., p. 105.
[62]. A list of the Commission’s findings is set out in its report: ibid., pp. xxxiv–xxxvi.
[63]. Ibid., pp. xxxvii–xxxix.
[65]. Regulatory Impact Statement contained in the Explanatory Memorandum, Customs Amendment (Malaysia‑Australia Free Trade Agreement Implementation and Other Measures) Bill 2012, op. cit.
[68]. These factors were examined in substantial detail and only a brief overview has been included in this Bills Digest.
[69]. Regulatory Impact Statement contained in the Explanatory Memorandum, op. cit., pp. 3–9.
[77]. National Interest Analysis, Malaysia-Australia Free Trade Agreement, op. cit.
[79]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. 31.
[91]. M Mugliston, Review into Treaty tabled on 14 August 2012, speech, op. cit., p. 7. In fact, New Zealand and Malaysia, upon entering into a FTA in 2009, also entered into labour and environmental standards agreements: New Zealand Ministry of Foreign Affairs and Trade, ‘New Zealand - Malaysia Free Trade Agreement’, website, viewed 20 November 2012, http://www.mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Malaysia/index.php
[93]. M Mugliston, Review into Treaty tabled on 14 August 2012, speech, op. cit., p. 7.
[94]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. 24.
[96]. C George, ‘Regional Trade Agreements and the Environment: Monitoring Implementation and Assessing Impacts’, OECD Trade and Environment Working Papers 2011/02, OECD Publishing, 2011, viewed 26 November 2012, http://dx.doi.org/10.1787/5kgcf7154tmq-en
[98]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., pp. 24–27.
[101]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., pp. 30–31.
[104]. Ibid., p. 34. The exception to this was the Australian Greens who tabled a Dissenting Report. The details of this report are discussed under the heading ‘policy position of non-government parties’.
[112]. There are four Liberal Party members and two National Party members currently sitting on JSCOT: JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. v.
[115]. ACTU, Submission to JSCOT, op. cit., pp. 6–7.
[117]. CFMEU, Submission to JSCOT, op. cit.
[122]. ACCI, Submission to JSCOT, op. cit., p. iii.
[124]. CPA Australia, Submission to JSCOT, op. cit., p. 1.
[125]. Australian Dairy Industry Council Inc. and Dairy Australia, Submission to JSCOT, op. cit., p. 1.
[127]. Explanatory Memorandum, op. cit., p. 2.
[133]. M Priestly, Australia's Free Trade Agreements, op. cit.
[134]. A country can only grant favourable treatment to another country that it has an FTA with if it observes certain conditions stipulated in the relevant provisions of the WTO agreements, to ensure the complementarity of the FTA with the WTO system (notably Article XXIV of the GATT, for trade in goods, and Article V of the GATS, for trade in services).
[135]. World Trade Organisation (WTO), ‘Principles of the trading system’, op. cit.
[136]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. 4.
[137]. Information on which FTAs (often called Regional Trade Agreement s or RTAs) have been notified to the WTO is available through the RTA database: World Trade Organisation (WTO), ‘Welcome to the Regional Trade Agreements Information System (RTA-IS)’, website, viewed 20 November 2012, http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx
[141]. Productivity Commission (PC), Bilateral and regional trade agreements, p. xxxix.
[142]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. 31.
[143]. ABC, ‘Benefits of Australia-Malaysia FTA questioned’, ABC Radio Australia.
[144]. Australian Greens, dissenting report, op. cit.
[146]. Productivity Commission (PC), Bilateral and regional trade agreements, op. cit., pp. xxxiv–xxxvi.
[147]. M Priestly, Australia's Free Trade Agreements, op. cit.
[148]. J Clare, ‘Second reading speech: Customs Amendment (Malaysia-Australia Free Trade Agreement Implementation and Other Measures) Bill 2012’, op. cit.
[154]. Negotiations for MAFTA commenced in 2005 under the Howard Government.
[155]. R Callick, ‘Trade win spurs regional talks’, op. cit.
[156]. M Priestly, Australia's Free Trade Agreements, op. cit.
[158]. M Priestly, Australia's Free Trade Agreements, op. cit.
[161]. Ibid., pp. 698–99.
[162]. ACCI, Submission to JSCOT, op. cit., p. 8.
[163]. R Callick, ‘Trade win spurs regional talks’, op. cit.
[165]. Dr M Churche, Review into Treaty tabled on 14 August 2012, speech, op. cit., p. 13.
[166]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. 5.
[167]. M Mugliston, Review into Treaty tabled on 14 August 2012, speech, op. cit., p. 6.
[169]. Scrutiny of Bills Committee, Alert Digest No. 14 of 2012, op. cit., p. 5.
[173]. Proposed subsection 153ZLB(1) of the Bill states that Malaysian originating goods ‘means goods that, under this Division [Proposed Division 1H], are Malaysian originating goods’.
[174]. Indirect materials are defined as goods or energy either used in the production, testing or inspection of goods, but not physically incorporated in the goods, or used in the maintenance of buildings or the operation of equipment associated with the production of goods: proposed subsection 153ZLB(1) of the Bill.
[175]. Explanatory Memorandum, op. cit., p. 61.
[176]. Proposed subsection 153ZLC(2) of the Bill sets out the circumstances under which goods will be considered to have been wholly obtained or produced in Malaysia or in Malaysia and Australia.
[178]. Explanatory Memorandum, op. cit., p. 60.
[179]. Section 14(2) of the Legislative Instruments Act 2003 provides: that ‘unless the contrary intention appears, the legislative instrument may not make provision in relation to a matter by applying, adopting or incorporating any matter contained in an instrument or other writing as in force or existing from time to time’.
[180]. Malaysia generally prefers the RVC approach while Australia prefers the CTC approach. However, Australian exporters may still choose to export their goods under the RVC based test.
[181]. JSCOT, Report 130: review into Treaty tabled on 14 August 2012, op. cit., p. 9.
[182]. PH Butt and D Hamer, eds., LexisNexis Concise Australian Legal Dictionary, op. cit., p. 120.
[183]. Under section 4 of the Customs Act, an authorised officer means an officer of Customs authorised in writing by the CEO to exercise the powers or perform the functions of an authorised officer under a section of the Customs Act.
[184]. Proposed subsection 126ALD(1) of the Customs Act refers to section 243SA of the Customs Act, which provides that failing to answer the officer may be considered an offence, as well as section 243SC. Proposed subsection 126ALD(2) of the Customs Act provides that an authorised official may disclose any answers received, in response to their questions, to Malaysian Customs officials.
[185]. Explanatory Memorandum, op. cit., p. 74.
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