Bills Digest no. 29 2015–16
PDF version [874KB]
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.
Paul Davidson, Economics Section
Juli Tomaras, Law and Bills Digest Section
12 October 2015
Contents
The
Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues
Main provisions of the Customs Amendment (China-Australia
Free Trade Agreement Implementation) Bill 2015
Main provisions of the Customs Tariff Amendment
(China-Australia Free Trade Agreement Implementation) Bill 2015
Date
introduced: 16 September 2015
House: House of
Representatives
Portfolio: Immigration
and Border Protection
Commencement: The
operative provisions of both Bills will commence from the later of the day of
Royal Assent and the day on which the China–Australia Free
Trade Agreement comes into force for Australia. Entry into force is expected before
the end of 2015.
Links: The links to the Bills,
their Explanatory Memoranda and second reading speeches can be found on the
Bills’ home pages for the Customs
Amendment (China-Australia Free Trade Agreement Implementation) Bill 2015
and the
Customs Tariff Amendment (China-Australia Free Trade Agreement Implementation)
Bill 2015, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
website.
Purpose of the Bills
The purpose of the Customs Amendment (China-Australia Free
Trade Agreement Implementation) Bill 2015 (the Customs Bill) is to amend
the Customs Act 1901 (Cth) to:
- define
Chinese originating goods, and permit preferential rates of customs duty when
those goods are imported into Australia
- facilitate
record keeping requirements, the power to require records to be produced, and
the power to ask questions; for goods exported to China.
- The purpose of the Customs Tariff Amendment
(China-Australia Free Trade Agreement Implementation) Bill 2015 (the Tariff
Bill) is to amend the Customs Tariff Act 1995 (Cth) to:
- facilitate
the staged reduction of applicable rates of customs duty to relevant Chinese
originating goods, and to facilitate other Chinese originating goods to become
duty-free upon commencement
- maintain
rates of customs duty on alcohol, tobacco, and petroleum products that are
equivalent to the excise duties that apply to those goods when they are
manufactured in Australia.
Background
The Bills implement the substantive provisions of the
China-Australia Free Trade Agreement, done in Canberra on 17 June 2015.
Proposed measures
Schedule 1 of the Customs Bill defines Chinese originating
goods so that such goods which are imported into Australia can receive
preferential customs duties. The Customs Bill also provides for exporters of
specified goods — manufactured in Australia which are exported to China — to be
potentially subject to record keeping and information provision requirements.
Schedule 1 of the Tariff Bill provides for the staged
reduction of rates of customs duties applicable to specified goods. Goods not specifically
listed will become duty-free upon the commencement of the Act. The Tariff Bill
also provides that excise‑equivalent rates of customs duty will apply to
various alcohol, tobacco, and petroleum products, at rates equivalent to those
that apply to domestically manufactured products.
Views of interest groups and non-government parties
Agricultural groups are highly supportive of the
China-Australia Free Trade Agreement; whereas trade unions and consumer groups
have expressed concerns surrounding labour market testing provisions, and
investor‑state dispute settlement provisions.
The Opposition has expressed concerns on the labour market
testing provisions in the Agreement, and the Australian Greens have expressed
concerns about trade agreements which contain investor-state dispute settlement
provisions. Independent Senators have also expressed reservations about the
labour market testing and investor-state dispute settlement provisions
contained in the Agreement.
The Customs Amendment (China-Australia Free Trade
Agreement Implementation) Bill 2015 (the Customs Bill) and the Customs
Tariff Amendment (China-Australia Free Trade Agreement Implementation) Bill
2015 (the Tariff Bill) are what is known as implementing Bills for the
China-Australia Free Trade Agreement (ChAFTA).[1]
Their passage is required before the ChAFTA can come into effect.
The basic purpose of the Bills is to implement the customs
dimensions of the ChAFTA by making relevant amendments to the Customs Act 1901
(Cth) (Customs Act) and the Customs Tariff Act 1995
(Cth) (Customs Tariff Act).[2]
The Customs Bill inserts:
- a new Division 1L into Part VIII[3]
of the Customs Act providing for:
-
rules of origin for goods imported into Australia from China: imported goods that satisfy
the new rules as 'Chinese originating goods' will be eligible for preferential
- a
new Division 4J into Part VI[4]
of the Customs Act providing for:
-
rules
relating to the export of goods to China: rules regarding record keeping and
other obligations, which will apply to persons exporting goods to China and
wanting to obtain preferential treatment for them in China, and on producers of
-
verification
powers relating to the exportation of goods to China.
The Tariff Bill contains amendments to the Customs
Tariff Act to implement the ChAFTA by:
- giving
free rates of customs duty for most goods that are ‘Chinese originating
goods’ in accordance with new Division 1L of Part VIII of the Customs
Act
- amending
Schedule 4 to the Customs Tariff Act to maintain customs duty rates for
certain Chinese originating goods in line with the applicable concessional item[5]
- phasing
the preferential rates of customs duty for certain ‘Chinese originating
goods’ to be ‘free’ of customs by the fifth year of phasing and
- inserting
a new Schedule 12 to the Customs Tariff Act to accommodate the
preferential and phasing rates of customs duty, and to maintain
excise-equivalent rates of duty on certain alcohol, tobacco and petroleum
products. This is done to achieve parity with rates of duty that would be
payable if those particular products were manufactured in Australia.
The Customs Bill consists of two schedules:
- Schedule
1 has three parts
- Part
1 deals with Chinese originating goods or rules of origin
- Part
2 deals with verification powers in relation to certain trade items (implementing
Article 3.21 of ChAFTA)[6]
and
-
Part
3 contains application provisions.
- Schedule
2 contains a minor contingent amendment to the Customs Act.
The Tariff Bill has one schedule, which makes various
consequential amendments to the Customs Tariff Act, including inserting
a new Schedule 12 into that Act, which specifies the preferential tariff rates
available to Chinese goods under ChAFTA.
Australian and international trade
policies
Australia has a long history of supporting trade
liberalisation. It has done this via multilateral forums such as the World
Trade Organisation (WTO), as well as unilaterally reducing tariffs and other
protective measures.[7]
While commitments made under WTO agreements are an
important part of international trade policy, their relative importance is
reducing. This is because of increased difficulties in countries reaching
agreements on new areas of trade liberalisation — areas that tend to be
considered of national significance or strategic importance.[8]
Partly as a result of these difficulties, there has been a significant rise in
the number of free trade agreements at the regional level.[9]
Australia has followed the global trend of negotiating
agreements on either a bilateral or regional basis. Prior to 2003,
Australia’s only agreement was with New Zealand, but since then agreements have
been entered into with Singapore, Thailand, the US, Chile, Malaysia, Japan,
Korea, and a regional free trade agreement with the Association of South-East
Asian Nations (ASEAN) and New Zealand.[10]
There are also several separate agreements currently under negotiation,
including with India and Indonesia.
Recent inquiry into the treaty
making process
A recent report by the Senate Standing Committees on Foreign
Affairs, Defence and Trade outlined four problems with the current treaty
making processes:
1.
All treaties are presented to parliament and subject to scrutiny after
agreements have been signed, leaving parliament ‘with an all-or-nothing choice’
when considering treaty implementation legislation.
2.
The Joint Standing Committee on Treaties does not commence inquiries
until after agreements are signed, and that this ‘does not provide an adequate
level of oversight and scrutiny’.
3.
The Department of Foreign Affairs and Trade’s consultation ‘is not
working’, falling short of expectations and adding to stakeholders’
frustrations.
4.
There is ‘an insufficient amount of publicly available information about
agreements under negotiation and independently sourced economic analyses of their
likely benefits are not mandatory’.[11]
The Committee made 10 recommendations in relation to the
treaty making process, including: recommending independent analyses be
undertaken prior to the commencement of negotiations (as well as an ex-post
evaluation of likely costs and benefits after negotiations have concluded);
granting confidential access to draft treaty texts; and the creation of a
‘model trade agreement’ that ‘covers controversial topics such as investor‑state
dispute settlement, intellectual property, copyright, and labour and
environmental standards’.[12]
Coalition Senators issued a dissenting report, disagreeing
‘with all of the findings and recommendations of the majority report’.[13]
The dissenting report stated that:
Calls from stakeholders to make the texts of agreements
publicly available prior to signature are impractical and do not take into
account the realities of negotiating international agreements.[14]
The dissenting report concluded that the treaty-making
process was working well, and as such, did not support the majority report’s
recommendations.[15]
The Australian Greens also issued a dissenting report. The
Greens agreed with the Committee’s identification of problems with
transparency, consultation, and independence of the current treaty-making
process. The Greens also agreed with the intent of several of the Committee’s
recommendations, acknowledging that they were an improvement upon the current
treaty-making process. However, the Greens considered that the Committee’s
recommendations did not go far enough in addressing the issues identified.[16]
Free trade agreements
What is a free trade agreement?
A trade agreement is a written contract between two or
more nation states for the purpose of regulating trade between those nation
states. Trade agreements are typically either multilateral or bilateral.
Multilateral trade agreements include more than two nation states, and often
involve establishing a collective set of rules to govern conduct in particular
areas.[17]
Bilateral trade agreements involve two nation states and establish a system of
mutual benefit in respect of trade and investment, and are often referred to as
free trade agreements (FTAs).[18]
Whilst bilateral trade agreements may often be referred to
as FTAs, they do not represent ‘free’ trade. As noted by the Productivity
Commission (PC) in its 2010 study into bilateral and regional trade agreements:
While most of these are commonly referred to as Free Trade
Agreements (FTAs), it is important to distinguish the effects of these agreements
from ‘free trade’. Free trade would require the removal of all tariffs, quotas,
subsidies and other government measures that distort trade flows. FTAs involve
preferential arrangements under which tariffs and some other barriers to trade
are lowered (although not always eliminated), but only for those countries
party to the agreement. The barriers for other countries are not reduced by the
agreement.
As such, FTAs can potentially distort trade flows as between
members and non-members...[19]
Therefore, FTAs can be considered to involve the granting
of more favourable trading conditions than apply to nation states outside of
the FTA. The WTO notes that entering into an FTA involves granting more
favourable conditions to parties to the agreement than to other WTO members’
trade, which ‘departs from the guiding principle of non-discrimination’.[20]
However, WTO members can enter regional trade agreements (a category that
includes customs unions and FTAs) so long as they are consistent with ‘WTO
rules ... which require that parties to a regional trade agreement have must have
established free trade on substantially all trade within the regional area, and
that the parties cannot raise their tariffs or other barriers against countries
outside the agreement’.[21]
Further, under the General Agreement on Tariffs and
Trade 1994, members of the WTO are required to apply ‘non-discrimination
clauses’ to nation states outside of an FTA.[22]
This is typically done via the most‑favoured nation rule, which (with
some exceptions) requires that each WTO member must grant all its trading
partners the conditions that it grants to its ‘most favoured’ trading partner.[23]
While trade in goods and services remain substantive
aspects of FTAs, there has been an increasing trend for FTAs to include a wider
range of commitments, including matters such as investment, government
procurement, and intellectual property.[24]
Estimated economic benefits and
costs of free trade agreements
The PC, in its 2010 study noted that it is inherently
difficult to estimate the expected benefits and costs of FTAs.[25]
In that study, concerns were raised about the timing, as well as the quality,
of analysis undertaken to estimate the benefits and costs of FTAs.[26]
The PC noted:
In practice, the actual agreements negotiated have sometimes
entailed gaps in coverage and/or long phase-in periods, and the available
evidence suggests that the anticipated benefits of their liberalising
provisions have not been fully realised. Some BRTAs [bilateral and regional
trade agreements] have also incorporated costly provisions that were not
included in the estimates. Together, these points suggest that the economic
value of Australia’s preferential BRTAs has been oversold.[27]
Benefits and costs of the
China-Australia Free Trade Agreement
Accompanying the China-Australia Free Trade Agreement (ChAFTA),
though not formally part of the Agreement, is the National Interest Analysis
(NIA), and Attachment II comprises the Regulation Impact Statement (RIS).[28]
The NIA provides a high-level summary of the current trade relationship, the
key provisions of the ChAFTA, and estimates of the economic benefits and
costs of entering into the Agreement.
The NIA notes that in 2013-14, two-way trade reached nearly
$160b, making China Australia’s largest trading partner. Around two-thirds of
the trade related to Australian exports to China ($107.6b, which was
33 per cent of Australia’s total exports), and one-third related to
Chinese imports ($52.1b, which was 15 per cent of Australia’s total
imports).[29]
The RIS notes that Australia stands to benefit from
increased market access outcomes in:
- agricultural
exports
- resources,
energy, and manufactured goods exports
- services
exports and
- investment.[30]
The only explicit cost that the RIS considers is the impact
of forgone tariff revenues, estimated to be more than $4b over the forward
estimates.[31]
The RIS also notes that the ChAFTA does not remove tariffs on a range of
agricultural products.[32]
It is expected that the outcomes under ChAFTA, if implemented, will be more
mixed for Australian manufacturing and small businesses.[33]
Economic benefits of China-New
Zealand FTA
China and New Zealand signed an FTA on 7 April 2008,
which entered into force on 1 October 2008.[34]
A strong focus of the FTA was on liberalising trade in goods, particularly reducing
applicable Chinese tariffs on New Zealand dairy exports.
Figure 1 illustrates the value of dairy exports to China for
both New Zealand and Australia. Some care is needed in interpreting the figure.
As shown, after the commencement of the China–New Zealand FTA, New Zealand
dairy exports experienced strong growth. While recognising the strong correlation
between the timing of the FTA and the significant growth in NZ dairy exports to
China, it is not possible to categorically state that the growth in
New Zealand dairy exports was solely
as a result of the introduction of the FTA. There are many possible causes that
could explain the strong growth in New Zealand dairy exports post-2008. For
instance, the growth could relate to another dairy exporting country (or indeed
several) having faced domestic problems (such as drought for instance) meaning
that they were unable to take advantage of increased Chinese demand. Additionally,
it should be noted that the most recent data indicate that both New Zealand and
Australian dairy exports to China have in fact fallen slightly.
Figure 1: Chinese dairy imports from New Zealand and
Australia, 1995-2014
Source: United Nations Conference on Trade and Development
(UNCTAD) statistics (unpublished), accessed
24 September 2015.
Arguments for export diversification in terms of destination
The significant expansion in global trade since the latter
half of the 20th century has seen patterns of trade which diverge from those
predicted (and even prescribed) ‘by classical trade theories[35]
built around perfect competition, comparative advantage and constant returns to
scale.’[36]
According to Sannassee et al:
In most of the studies carried out, reference is made to the
“concentration phenomenon”, which basically consists of commodity and market
concentration and which is believed to be the major contributor to instability
in export revenue. It is argued that countries with commodity concentration are
adversely affected by volatility in market prices through swings in foreign
exchange revenues.[37]
While there is much recognition of the prospects that a
growing Chinese economy and middle class create in terms of demand for
Australian exports, there has been nonetheless some commentary around whether
Australia might be wise to have a ‘plan B’ in the event of fluctuations in the
Chinese economy.
It has been pointed out that even in the absence of a free
trade agreement with China:
Australia is now the most China-dependent economy in the
world. Australian exports to China have grown from 8.5% of the total in 2003-04
to 32.5% in 2013-14 – and they continue to grow.
Australia’s dependence on its top three export destinations
has also increased over the past ten years. The top three accounted for 33.7%
(Japan 15.7%, US 9.5% and China 8.5%) in 2003-04, rising to 55.1% (China 32.5%,
Japan 15.8% and South Korea 6.8%) by 2013-14. The top five now account for 63.7%,
up from 47.7%.[38]
While it is acknowledged the ChAFTA may help us
diversify our economy, it does not necessarily offer any guarantee. Thus it has
been argued in simple terms, that ‘Australia needs active policy efforts to
diversify the economy away from a reliance on resources and on buying and
selling houses. Policymakers need to reconsider industry policies and think of
ways to develop new industries rather than just support old ones in ad hoc ways’.[39]
Joint Standing Committee on Treaties
The China-Australia Free Trade Agreement has been referred
to the Joint Standing Committee on Treaties (JSCOT) for inquiry and report by 12 October
2015.[40]
Senate Foreign Affairs, Defence and
Trade References Committee
On 24 March 2015, the Senate referred
matters relating to the proposed China-Australia Free Trade Agreement[41] to the Senate
Foreign Affairs, Defence and Trade References Committee for inquiry
and report.[42]
The report is due within one month of the JSCOT inquiry.
Senate Standing Committee for the
Scrutiny of Bills
At the time of writing this digest, the Senate Standing
Committee for the Scrutiny of Bills had yet to consider this Bill.
Opposition policy position
The Australian Labor Party has stated that it supports a
free trade agreement with China, although reservations have been expressed
about potential labour arrangements under the agreement:
Labor’s concern about the free trade agreement isn’t that we
shouldn’t have a free trade agreement – we should. ... There is no doubt as more
evidence comes to light that the Government needs to do more secure preference
for Australians to get jobs in Australia. Now this isn’t a deal killer. It
doesn’t involve changing the treaty but if the Government say there hasn’t been
any secret deals done then I think they should come to the negotiating table.
Labor believes in Australian jobs. ... I think it is important as we pursue trade
opportunities with China and the rest of Asia, that we also prioritise
Australians getting jobs in Australia.[43]
More recently, the Leader of the Opposition stated:
We think that a China Free Trade Agreement is a good thing
but we also want to ensure that Australians are getting the opportunities to
work in Australia and getting priority. That's all. Now the Government says
that there's no problem and that any of the concerns we have won't materialise,
that's the basis for a negotiation. If they say there is no problem and
legitimate concerns have been expressed we'll work it out.[44]
Policy position of other
parties/independents
The Australian Greens have stated that they do not agree
with FTAs which contain Investor-State Dispute Settlement (ISDS) provisions,[45]
and Senator Whish-Wilson introduced a Private Senators’ Bill to preclude the
Commonwealth from entering into FTAs which contain ISDS provisions.[46]
On 6 March 2014, the Senate referred the Trade and Foreign Investment
(Protecting the Public Interest) Bill 2014 to the Foreign Affairs, Defence and
Trade Legislation Committee for inquiry and report. The Committee reported that
it had ‘received over 11,000 emails from individuals using an online tool
asking people to express their opposition to investor state dispute settlements
under trade agreements to the committee.’[47]
The majority report of the Committee recommended the Bill not be passed,
concluding that:
...alleged risks to Australian sovereignty and law making
arising from the ISDS system are overstated and are not supported by the
history of Australia's involvement in negotiating trade agreements.[48]
In a 2014 article, Senator David Leyonhjelm wrote in support
of free trade, but expressed reservations about the value of free trade
agreements, suggesting that unilaterally removing tariffs would lead to better
outcomes.[49]
Senator Nick Xenophon has criticised the inclusion of ISDS provisions in the ChAFTA,
and more broadly considers that trade has tended to become more unbalanced with
other recently commenced FTAs.[50]
Senator John Madigan argued that the ChAFTA amounts to ‘WorkChoices
by stealth’, allowing Chinese workers into Australia under reduced terms and
conditions of employment.[51]
Senator Jacqui Lambie noted that the ChAFTA should be renegotiated so
that it ‘protects Australian workers’ and ‘takes away China’s right to sue our
government’.[52]
Agricultural industry organisations
Submissions to the Joint Standing Committee on Treaties
(JSCOT) inquiry on ChAFTA from agricultural producers were strongly
supportive of the agreement. For example, the Winemakers Federation of Australia
stated:
The China–Australia Free Trade Agreement delivers real
benefits for the Australian wine sector. We would urge the government to
proceed as quickly as possible to ratify the agreement so that we can maximise
the benefits to the sector.[53]
Similarly, the Australian Red Meat Industry submitted:
Our industry is strongly supportive of the ChAFTA,
which upon entry into force will initiate significant improvements to current
access arrangements. ChAFTA has delivered on our priorities via securing
future elimination of all import tariffs imposed on our respective products
over various implementation timeframes - thereby helping to maintain
competitiveness and bolster trade certainty.[54]
Likewise, the National Farmers Federation (NFF) strongly
supported the ChAFTA:
In the NFF’s view, the agreement will provide millions of
dollars in export value to Australian farmers, including those in the red meat,
grains, dairy, sugar, pork and horticulture sectors. The agreement recognises
agriculture as one of the nation’s export strengths and will open opportunities
for the sector in China.[55]
The Australian Dairy Industry stated its approval of the ChAFTA,
and expressed concern about the possibility of its introduction being delayed:
Timing is of the essence. The Australian dairy industry
strongly urges the Federal Parliament to implement ChAFTA prior to the
end of 2015, so that a second round of tariff cuts can occur on 1 January 2016.
Any delay in implementation of ChAFTA would cost at
least $20 million in tariff savings for Australian origin product and could
potentially cost $60 million in tariff savings for Australian dairy products,
making it extremely difficult for Australian industry to compete and gain
further market share.[56]
Other industry organisations
Overall, industry organisations considered that the ChAFTA
in its current form would bring benefits to Australia. For example, the
Minerals Council of Australia noted:
ChAFTA is the best
available option for advancing Australia’s broader commercial interests with
our largest trading partner, including by advancing our interests in minerals
and energy and related services and investment. The Agreement provides for
substantial liberalisation of trade and investment that will deepen bilateral
economic integration. It eliminates all tariffs on minerals and energy exports
to China within four years of entry-into-force, reducing transaction costs by
up to around $600 million per year.[57]
Master Builders Australia, while expressing support for
the ChAFTA, did express views on skills assessments for various Chinese
visa applicants under the Agreement:
Master Builders recommends that the commitment in ChAFTA
only removes the need for a mandatory skills assessment at the 457 visa
application stage and that all applicants be required to demonstrate to the
Department of Immigration and Border Protection that they possess the requisite
skills and experience to work in particular occupations in Australia.
...Master Builders recommends that an additional skills
assessment from a credible Registered Training Organisation approved by Trades
Recognition Australia should be undertaken when further verification of skills
is required during the visa application stage. The need for additional
assessment should be determined by the Department of Immigration and Border
Protection.[58]
The Australian Bankers’ Association expressed support for
the ChAFTA and submitted that:
...there is considerable upside for Australia in broadening its
trading base with China to include other areas of comparative advantage and
complementarity. Trade in services, particularly financial services, provides a
key opportunity.[59]
The Public Health Association of Australia (PHAA)
expressed concern over the inclusion of ISDS provisions in a submission to the
Senate Standing Committee on Foreign Affairs and Trade inquiry into ChAFTA:
PHAA is strongly opposed to the inclusion of investor-state
dispute settlement in trade agreements. ISDS provides an avenue for foreign
investors to sue governments (including state/territory and local governments)
in international tribunals for monetary compensation over policies and laws
that they perceive as harmful to their investments. In recent years there has
been a dramatic increase in ISDS claims over health and environmental issues.[60]
Trade unions
Several unions provided submissions to the JSCOT inquiry.
For example, the Electrical Trades Union of Australia expressed concerns about
the ChAFTA, specifically in terms of labour market testing requirements:
We submit that the provisions around labour mobility,
training, worker protections (or lack there-of), corporate rights and more,
mean the agreement cannot be supported by the Committee in its current form.
The ChAFTA will lock Australians out of job opportunities,
erode industrial and public safety standards, and expose Australia to unfunded
legal action that costs millions.[61]
The Australian Council of Trade Unions (ACTU) expressed
support for a free trade agreement with China, but considered that the ChAFTA
as currently proposed:
...contains serious deficiencies that should be removed through
renegotiation of the relevant provisions.
While the ACTU would welcome a real prospect of new
opportunities for decent work that could be created by improved access to China’s
market, the agreement’s deficiencies as presently constructed, on balance are
clearly not in the national interest.[62]
The Construction, Forestry, Mining and Energy Union
summarised the ChAFTA as:
...the worst trade agreement that an Australian government has
ever signed and attempted to impose on the Australian public.[63]
Consumer groups and community
organisations
Consumer group CHOICE expressed concern over the inclusion
of ISDS provisions in the ChAFTA, and stated that it:
...opposes the inclusion of Investor State Dispute Settlement
(ISDS) provisions in trade agreements due to the risk they pose to future
policy changes in the interest of Australian consumers. ...CHOICE believes that
it would be to the public detriment to implement a free trade agreement that
further restricts the Government’s ability to legislate changes to Australia’s
country of origin labelling framework or to other food labelling policies.[64]
The Australian Fair Trade & Investment Network
expressed concern about the apparent lack of labour market testing in the ChAFTA,
as well as the inclusion of ISDS provisions:
The ISDS section of the ChAFTA investment chapter
spells out a detailed procedure for these disputes. But the section is
unfinished, with important definitions of the criteria that can be used to sue
governments to be determined by review process in three years’ time. These
include two of the most controversial aspects of ISDS, the definition of
indirect expropriation and the definition of minimum standard of treatment for
foreign investors. These are provisions often used to sue governments under
other agreements. The Australian Parliament is being asked to vote for the
implementing legislation for this agreement without having the details of what
these future provisions may be. This is like asking Parliament to sign a blank
cheque for an agreement which has been badly negotiated.[65]
The Explanatory Memorandum to the Customs Bill 2015
provided a financial impact statement (Table 1). The financial position relates
to forgone tariff revenues on Chinese imports.[66]
It does not consider other costs or benefits of the ChAFTA.
Table 1: Underlying cash impact ($ million)
2015-16
|
2016-17
|
2017-18
|
2018-19
|
Total
|
-610
|
-1,070
|
-1,210
|
-1,260
|
-4,150
|
Source: Explanatory
Memorandum to the Customs Amendment (China‑Australia Free Trade
Agreement Implementation) Bill 2015, p. 3.
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed both
Bills’ compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that both Bills are compatible.[67]
Parliamentary Joint Committee on
Human Rights
At the time of writing, the Parliamentary Joint Committee on
Human Rights had yet to consider this Bill.
The China-Australia Free Trade
Agreement
Background
A joint feasibility study was conducted in 2005 and
recognised ‘...that an Australia-China FTA is feasible and, on balance, would
substantially benefit both countries.’[68]
The first round of negotiations took place on 26 May 2005 in Sydney, and
the twenty-first and final round of negotiations took place on
1-5 September 2014 in Beijing. Negotiations formally concluded in November
2014.[69]
The ChAFTA was signed on 17 June 2015 in
Canberra, and was tabled in the Australian Parliament the same day.[70]
Tariff reductions
As noted in the NIA:
On entry into force, more than 85 per cent (85%) of
Australia’s trade to China will have tariffs set at zero and on the full
implementation of ChAFTA, 95 per cent (95%) of trade will enter
duty-free.[71]
Many agricultural tariffs, some of which are currently set
at 30 per cent, will be progressively reduced by a process of staged reduction
after the ChAFTA enters into force. In addition to reductions in
agricultural tariff rates, tariff rates will also be reduced by China on a
range of resources and energy products such as coal, zinc, some aluminium
products, and mineral substances. Tariff rates are also set to be reduced for
some products manufactured in Australia, such as car engines, aluminium plates
and sheets, and motor vehicles.[72]
The RIS accompanying the NIA noted that, after full
implementation, 97 per cent of Chinese tariff lines will be duty-free for
Australian exporters.[73]
Once entering into force, the ChAFTA will reduce the tariff rates on
92 per cent of Australian tariff lines to zero, reducing the
remaining eight per cent over the next three to five years, until 100 per cent
of tariff lines are reduced to zero.[74]
Table 2: Examples of some of the
significant tariff phase-outs that will occur in regard to key Australian
exports to China. There is already evident and forecast growth in a few of
these sectors.
Sector
|
Current tariffs
|
Phase-out period
|
Current exports to China
|
Energy & Mineral Resources
|
‘China is Australia’s largest resources and energy market,
with exports worth over $77 billion in 2014.’ [75]High-cost
miners who are struggling with falling commodity prices will enjoy a slight
cost reduction.
|
Alumina
|
8%
|
Immediately
|
$1.2
billion
|
Coking coal
|
3%
|
Immediately
|
$5.1 billion
|
Non-coking coal
|
6%
|
2 years
|
$3.2
billion
|
nickel mattes and oxides[76]
|
3%
|
Immediately
|
$672
million
|
Agriculture, forestry and fisheries[77]
|
China is Australia’s largest export market, worth $8
billion in 2014, up from $5 billion in 2010.[78]
|
Skins, hides and leather
|
5% – 14%
|
2-7 years
|
$910 million
|
Beef meat
|
China’s demand for high-quality beef is growing rapidly,
driven by a growing middle class. The OECD assesses that beef will be the
fastest-growing import sector in China.[79]
|
|
12-25%
|
9 years
|
$655 million
|
Sheep and goat meat
|
China’s demand for sheep meat is growing rapidly and China
is already Australia’s second-most important sheep meat export destination,
despite current tariff rates.[80]
|
|
12%-23%
|
8 years
|
$425 million
|
Barley
Sorghum
Pulses
Malt & wheat gluten
|
3%
2%
7%
10%
|
Immediately
Immediately
4 years
4 years
|
$1 billion[81]
$264 million
|
Australian seafood[82]
(including abalone, rock lobsters, prawns, scallops and oysters)
|
8% - 15%
|
4 years
|
$35 million
|
Horticulture, including fruits,
vegetables and nuts
|
China is already a rapidly growing market
for Australian horticultural products, with exports worth $56 million in 2014
– up from $13 million in 2010.[83]
|
|
Up to 30%
|
4 – 8 years
|
$56 million
|
Dairy[84]
|
China is Australia’s second largest market for dairy
exports with demand expanding rapidly and exports almost doubling recently in
2013-14.[85]
|
|
10%-19%
|
4 – 11 years
|
$443 million
|
Wine and spirits
|
‘China’s wine import market is growing dramatically,
almost doubling in size since 2010.’ [86]
|
Wine
|
14% - 20%
|
4 years
|
$211 million
|
Alcoholic beverages and spirits
|
Up to 65%
|
4 years
|
|
Live animal exports
|
A growing market, with exports doubling since
2010.[87]
|
|
10%
|
4 years
|
$254 million
|
Source: DFAT, ‘
Factsheet: resources, energy and manufacturing’ and ‘
Factsheet: agriculture and processed food’,
China–Australia Free Trade Agreement, 26 August 2015, both accessed
1 October 2015.
Investment
The NIA noted that the Foreign Investment Review Board
(FIRB) screening thresholds for private Chinese investment will be lifted in
non-sensitive areas from $252 million to $1,094 million, in line with
concessions granted to other countries under previously negotiated FTAs. As
stated in the NIA:
Australia has retained the ability to screen investments in
sensitive sectors, including media, telecommunications, and defence-related
industries at lower levels and reserved policy space to screen proposals for
foreign investment in urban land, agricultural land (at $15 million or above)
and in agribusiness (at $53 million or above).[88]
The FIRB has a policy of screening all public (that is,
government) investments, and the ChAFTA does not affect that policy.[89]
Commitments on services
Australia’s services exports were around $63 billion in 2014–15,
which represented 18 per cent of total exports.[90]
The ChAFTA provides improved market access conditions for Australian
service providers in the following range of areas:
- environmental
services
- construction
and related engineering services
- services
incidental to forestry
- engineering
services
- integrated
engineering services
- computer
and related services
- tourism
and travel related services
- related
scientific and technical consulting services
- securities
services
- some
education services.[91]
In addition to the commitments above, China has agreed to
a future review of its commitments to services whereby it may introduce a
‘negative list approach’. Such a list proscribes services that are not covered
under a trade agreement. Australia adopted this approach in its commitments to
services under the ChAFTA. More generally, the Chapter on services is to
be reviewed every two years (or as otherwise agreed) ‘with a view to the
progressive liberalisation of the trade in services between [China and
Australia] on a mutually advantageous basis.’[92]
In addition to the Chapter on services, a side letter to
the ChAFTA notes that 77 Australian CRICOS (Commonwealth Register of
Institutions and Courses for Overseas Students) registered higher education
institutions will be registered on the Chinese Government’s website for
overseas students. The registration will take place within one year of the
commencement of the ChAFTA.[93]
Movement of natural persons
Chapter 10 of the ChAFTA covers the movement of
natural persons. Both Australia and China have made a range of commitments that
apply to several categories of persons. Broadly, these categories are:
- business
visitors
- executives,
senior managers, and specialists as intra-corporate transferees
- independent
executives
- contractual
service suppliers
- installers
and servicers.
These categories of persons are primarily based on the
General Agreement on Trade in Services,[94]
apart from ‘installers and servicers.’ A number of previously negotiated Australian
FTAs have made commitments in relation to the first four categories of persons.[95]
None of Australia’s FTAs in force have included installers and servicers as
part of countries’ commitments.
Entry and temporary stay of installers and servicers is
proposed to be granted by Australia for up to three months and is restricted to
the following persons:
A natural person of China is an installer or servicer of
machinery and/or equipment where such installation and/or servicing by the
supplying company is a condition of purchase of the said machinery or
equipment. An installer or servicer must abide by Australian workplace
standards and conditions and cannot perform services which are not related to
the installation or servicing activity which is the subject of the contract.[96]
Under all categories, it is currently unclear how many persons
may potentially seek entry if the ChAFTA enters into force.
Labour market testing
Labour market testing (in relation to a nominated position
by an approved sponsor) means the:
...testing of the Australian labour market to demonstrate
whether a suitably qualified and experienced Australian citizen or Australian
permanent resident is readily available to fill the position.[97]
Under the ChAFTA, labour market testing (LMT) is expressly
excluded. Article 10.4.3 provides:
In respect of the specific commitments on temporary entry in
this Chapter, unless otherwise specified in Annex 10‑A, neither
Party shall:
(a) impose or maintain any limitations on the total number of
visas to be granted to natural persons of the other Party; or
(b) require labour market testing, economic needs testing or
other procedures of similar effect as a condition for temporary entry.[98]
The application of LMT is not altered by Annex 10-A, and
therefore is expressly excluded from applying to the categories of persons
detailed above. LMT has also been expressly excluded from other FTAs. The
Singapore‑Australia Free Trade Agreement provides that:
Neither Party shall require labour market testing, labour
certification tests or other procedures of similar effect as a condition for
temporary entry in respect of natural persons on whom the benefits of this
Chapter are conferred.[99]
However, the ASEAN-Australia-New Zealand FTA and the Malaysia-Australia
FTA provided that LMT:
...may be required for some occupations, to the extent that
this is not inconsistent with Australia’s commitments under the WTO and other
international trade agreements to which it is a party as at entry into force of
this Agreement.[100]
The LMT under the ASEAN-Australia-New Zealand FTA and the Malaysia-Australia
FTA only relates to contractual service suppliers.
The majority of Australia’s FTAs are silent as to the
application of LMT. However, Ministerial Determinations issued under subsection 140GBA(2)
of the Migration Act 1958 (Cth) have expressly excluded LMT from a range
of categories of persons covered by the various FTAs.[101]
It appears that a similar approach is proposed for the ChAFTA:
...in order to implement the obligations in ChAFTA in
Australia, a Migration Act 1958 (Cth) Determination is required in
relation to labour market testing.[102]
Memorandum of understanding and
Investor Facilitation Arrangements
Alongside the negotiation of the ChAFTA, China and
Australia negotiated a memorandum of understanding (MOU) which is proposed to
allow for Investor Facilitation Arrangements (IFAs). No other Australian FTA in
force has such an arrangement.[103]
The NIA accompanying the ChAFTA expressly provides that the MOU on IFAs
does not form part of the Agreement.[104]
Since the IFAs do not form part of the Agreement, it appears they represent
government policy.
Skills assessments
Under a side letter to the ChAFTA (that does form
part of the Agreement), Australia has committed to remove mandatory skills
assessments from 10 occupations, upon the treaty entering into force. These
occupations are:
- automotive
electrician
- cabinetmaker
- carpenter
- carpenter
and joiner
- diesel
motor mechanic
- electrician
(general)
- electrician
(special class)
- joiner
- motor
mechanic (general) and
- motorcycle
mechanic.
Australia has committed to reviewing the remaining
occupations within two years of the date of the treaty’s entry into force,
‘with the aim of further reducing the number of occupations, or eliminating the
requirement within five years’.[105]
There are currently 145 skilled occupations listed in the Migration Regulations
1994,[106]
28 of which require skills assessments.[107]
Investor-State Dispute Settlement
Australia has several FTAs in force that have investor-state
dispute settlement (ISDS) provisions, such as the Australia-US FTA and the
Korea‑Australia FTA.
The ChAFTA includes a section on ISDS. Generally,
ISDS allows an investor of a recognised investment of one nation state to bring
a complaint against the government of another nation state, under certain
circumstances where the other government has in some way reduced the value of
the said investment. Definitions vary as to what constitutes an ‘investment’ and
who is an ‘investor’. There are also differences around the nature of the complaint,
and in what forum it is heard.
‘Investor’ and ‘investment’ as proposed in the ChAFTA
are broadly defined.[108]
Given the breadth of the definitions, there is the potential for a range of
investments to be caught within the ambit of the Agreement. To some extent the
potential investments are limited by the application of Article 9.11.4:
Measures of a Party that are non-discriminatory and for the
legitimate public welfare objectives of public health, safety, the environment,
public morals or public order shall not be the subject of a claim under this
Section.[109]
The ChAFTA proposes that, in the event of a dispute
that cannot be settled, the matter will go to arbitration.[110]
This means that the dispute, if one were to arise, would not be settled through
either the Australian or Chinese judicial systems (depending on where the cause
of action arises), but rather through arbitral proceedings.
ISDS claims are generally brought under the International
Centre for Settlement of Investment Disputes (ICSID) Convention and associated
rules, or under the United Nations Commission on International Trade Law
(UNCITRAL) arbitration rules. The ISDS provisions in ChAFTA propose to
permit a claimant to bring a matter under either mechanism.[111]
A side letter that is incorporated as part of the ChAFTA however,
modifies the rules around transparency if a matter is brought under the
UNICTRAL rules, stating that the transparency rules do not apply. The side
letter also notes that the parties shall enter into consultations within 12
months of the entry into force of the ChAFTA to further agree on the
application of the UNCITRAL Rules on Transparency.[112]
In addition to the proposed ISDS provisions, the ChAFTA
proposes a forward work program. The forward work program prescribes that
Australia and China will conduct a review of the investment legal framework
within three years of the Agreement entering into force. The scope of the
review is broad ranging and includes ISDS generally, as well as ‘[t]he application
of investment protections and ISDS to services supplied through commercial
presence’.[113]
Critiques of ISDS provisions
In a 2010 study on bilateral and regional trade agreements
(BRTAs), the PC concluded:
Australia has also signed up to investor-state dispute
settlement provisions in some BRTAs for which there appear to be few benefits
and considerable risks.[114]
More recently, the PC reiterated its concerns about including
ISDS provisions in FTAs, in the context of both the ChAFTA and the
Trans-pacific Partnership Agreement.[115]
The current Chief Justice of the High Court has expressed
reservations about ISDS provisions generally. Specific concerns related to the
differences observed across various Australian FTAs, which included:
- the
range of disputes covered
- the
nature of the investments protected
- the
arbitral options
- the
extent to which they preserve access to judicial proceedings in the Respondent
State and
- whether
they require exhaustion of remedies in the courts of the Respondent State.[116]
Chapter 3 of the ChAFTA
provides for governing provisions on rules of origin and implementation
procedures for various goods that will be subject to tariff reductions. As part
of the implementation procedures, an amendment to the Customs Act 1901
is required in order to facilitate the Agreement’s provisions.[117]
Schedule 1, Part 1—Chinese
originating goods
Part 1 of Schedule 1 inserts Division 1L into Part VIII of
the Customs Act, and comprises seven Subdivisions. Proposed Subdivision
A defines ‘Chinese originating goods’, to which preferential rates of
duty apply under the Customs Tariff Act 1995. Proposed Subdivisions B-E
outline the circumstances under which goods are to be considered Chinese
originating goods.
Rule 1—goods wholly obtained or
produced in the territory of China (proposed Subdivision B)
In simple terms, a good will meet the requirement of being
an ‘originating good’ under ChAFTA if it is wholly obtained or produced
entirely in China, and either:
- the
importer of the goods has, at the time the goods are imported, a Certificate of
Origin or a Declaration of Origin, or a copy of one, for the goods or
- Australia
has waived the requirement for a Certificate of Origin or a Declaration of
Origin for the goods.
The Certificate of Origin (COO) is a document to
certify the place of growth, production or manufacture of goods. It is required
when exporting to specific countries, when requested by the consignee for
customs clearance. The COO identifies goods and contains an express
certification, normally by a government authority or other empowered body, that
the goods in question originate in a specific country. The one COO may apply to
multiple importations of the goods specified.
A COO means a certificate that is in force and that complies
with Article
3.14 of the Agreement.[118]
A Declaration of Origin means a declaration that is in force and that complies
with Article
3.15 of the Agreement.[119]
There are 10 possible ways that goods can be ‘wholly
obtained’ or produced in the territory of China (proposed subsection
153ZOC(2)).[120]
Rule 2 - Chinese originating goods
that are goods produced in China, or in China and Australia, from originating
materials (proposed Subdivision C)
Goods are Chinese originating goods if ‘they are produced
entirely in the territory of China, or entirely in the territory of China and
the territory of Australia, from originating materials only’ and the importer
has either a Certificate of Origin or a Declaration of Origin (or a copy of
one), or the need for either has been waived by Australia.[121]
Originating materials are defined as:
- Chinese
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.[122]
Indirect materials means:
- goods
or energy used in the production, testing or inspection of goods, but not
physically incorporated in the goods or
- goods
or energy used in the maintenance or operation of equipment or buildings
associated with the production of goods.
The types of goods or energy used include fuel, tools,
dies and moulds, and spare parts and materials.[123]
Rule 3 - Chinese originating goods
that are goods produced in China, or in China and Australia, from non‑originating
materials (proposed Subdivision D)
Non-originating materials means goods that are not
originating materials.[124]
Goods are considered to be Chinese originating goods under the proposed
Subdivision if:
- the
goods are classified by the regulations for the purposes of the Subdivision and
- they
are produced entirely in the territory of China, or entirely in the territory
of China and the territory of Australia, from non-originating materials only or
from non-originating materials and originating materials and
- each
requirement that is prescribed by the regulations in relation to the goods is
met and
- the
importer has either a Certificate of Origin or a Declaration of Origin (or a
copy of one), or the need for either has been waived by Australia.[125]
Change in tariff classification
Proposed subsections 153ZOE(2)-(4) provide that
regulations may prescribe that each non-originating material used in production
of a good is required to satisfy a change in tariff classification, and when such
a requirement (if any) is satisfied. A change in tariff classification relates
to Article 3.4 of the Agreement, and Annex II to the Agreement which provides for
product-specific rules of origin.[126]
If regulations are made in relation to non-originating materials and the
non-originating materials used do not satisfy the change in tariff
classification requirements, the requirement is taken to be satisfied providing
that the non-originating materials do not exceed 10 per cent of the customs
value of the goods.[127]
Regional value content
Regional value content is a variation on rules of origin,
and prescribes that a certain percentage of the total value of a good must be
from regional (i.e. domestic) origin. The method of calculation is prescribed
in Article 3.5 of the Agreement. Proposed subsection 153ZOE(5) permits
regulations to be made which prescribe a certain percentage of the total value
of a good that is to be comprised of regional value content.
Subdivision E
Proposed Subdivision E provides that goods are
Chinese originating goods if:
- they
are accessories, spare parts or tools in relation to other goods
- the
other goods are imported into Australia with the accessories, spare parts or
tools
- the
other goods are Chinese originating goods
- the
accessories, spare parts or tools are classified and invoiced with the other
goods and are included in the price of the other goods
- the
accessories, spare parts or tools are not imported solely for the purpose of
artificially raising the regional value content of the other goods and
- the
quantities and value of the accessories, spare parts or tools are customary for
the other goods.
Subdivision F
Proposed Subdivision F outlines non-qualifying
operations. Goods are not Chinese originating goods pursuant to six
circumstances outlined, despite operations or procedures such as: packaging or
repackaging; placing in bottles, cans, flasks, bags, cases or boxes; fixing on
cards or boards or other simple packaging operations; or the disassembly of
goods.
Subdivision G
Proposed subsection 153ZOH(1) provides that goods are
not Chinese originating goods if the goods are transported through the
territory of a non-party and one or more of the following apply:
- the
goods undergo any operation in the territory of the non-party (other than
unloading, reloading, repacking, relabelling for the purpose of satisfying the
requirements of Australia, splitting up of the goods for further transport,
temporary storage or any operation that is necessary to preserve the goods in
good condition);
- if
the goods undergo temporary storage in the territory of a non-party—the goods
remain in the territory of the non-party for a period exceeding 12 months;
- the
goods do not remain under customs control at all times while the goods are in
the territory of the non‑party.
Regulations may be made which specify the circumstances in
which goods are under customs control while the goods are in the territory of a
non-party.[128]
Schedule 1, Part 2—Verification
powers
Part 2 of Schedule 1 proposes to amend the Customs Act
by inserting Division 4J—Exportation of goods to China into Part VI of the Act.
The proposed definitions section defines the territory of China to mean the
same as under Article 1.3 of the Agreement, and expressly excludes Hong
Kong, Macao, and the Separate Customs Territory of Taiwan, Penghu, Kinmen and
Matsu.[129]
Proposed section 126AOB allows for regulations that
prescribe record keeping obligations in relation to goods that are exported to
the territory of China and are claimed to be Australian originating goods.
Proposed section 126AOC provides that if record
keeping regulations are made for the purposes of the previous proposed section,
then an authorised officer may require that a person subject to the regulations
produce such records.
Proposed section 126AOD permits an authorised officer
to ask questions of an exporter (exporting goods to the territory of China and
claiming to be Australian originating goods) in order to verify the goods’
origin.
For the purpose of proposed sections 126AOC and 126AOD
information may be given to China to assist with verifying a claim for
preferential tariff treatment.
Australian originating goods are proposed to mean goods that
are Australian originating goods under a law of China that implements the
Agreement.[130]
Schedule 1, Part 3—Application
provisions
Schedule 1, Part 3 provides that the amendment made by item
1 (the proposed insertion of Division 1L into Part VIII of the Customs
Act) applies in relation to:
- goods
imported into Australia on or after the commencement of that item; and
- goods
imported into Australia before the commencement of that item, where the time
for working out the rate of import duty on the goods had not occurred before
the commencement of that item.[131]
Item 2 (the proposed insertion of Division 4J into Part VI
of the Customs Act) applies in relation to goods exported to the
territory of China on or after the commencement of that item (whether the goods
were produced before, on or after that commencement).[132]
Article 2.4.1 of the Agreement provides that each ‘Party
shall eliminate its customs duties on originating goods of the other Party in
accordance with its Schedule to Annex I’.[133]
The Customs Tariff Amendment (China‑Australia Free Trade Agreement
Implementation) Bill 2015 (the Tariff Bill) implements the commitments made
under Article 2.4.1, the associated Annex and various Tariff Schedules.
Schedule 1—Amendments
Items 1-8 and 18-27 largely reflect minor
amendments to the Customs Tariff Act 1995 that are required to
facilitate the insertion of proposed Schedule 12, which deals with
implementing the agreed elimination of customs duties under the Agreement.[134]
Items 9-17 provide for necessary amendments to the Customs
Tariff Act that relate to the Customs Bill. Item 9 provides for the
insertion of proposed section 13J into the Customs Tariff Act,
which relates to Chinese originating goods, and is consistent with the various
definitions proposed under Division 1L of Part VIII of the Customs Act.
Current section 16 of the Customs Tariff Act sets out
how duty is to be worked out for various goods. Section 16 will be amended by items
10 to 13 of Schedule 1 to the Tariff Bill. Item 13 would insert proposed
subsection 16(4A) to provide that, for the purposes of Schedule 12 to
the Customs Tariff Act:
- a
reference in that Schedule to year 2 is a reference to the first calendar year
beginning after the commencement of this subsection
- a
reference in that Schedule to year 3 is a reference to the second calendar year
beginning after the commencement of this subsection
- a
reference in that Schedule to year 4 is a reference to the third calendar year
beginning after the commencement of this subsection and
- a
reference in that Schedule to year 5 is a reference to the fourth calendar year
beginning after the commencement of this subsection.
Proposed Schedule 12 to the Customs Tariff Act
is inserted by item 28, and is discussed below. Schedule 1 to the Tariff
Bill (including proposed subsection 16(4A)) will commence at the same time as that
Schedule 1 of the Customs Amendment (China-Australia Free Trade Agreement
Implementation) Act 2015 (Cth) commences. This will be on the later of the
day that Act receives Royal Assent and the day that the ChAFTA
enters into force in Australia.
Item 12 proposes to amend subsection 16(1) and
provides that if goods are Chinese originating goods, then:
- if
the goods are classified to a heading or subheading in Schedule 3 that is
specified in column 2 of an item in the table in Schedule 12—then the rate of
duty that applies is set out in column 3 of that item or
- otherwise—Free.
Hence, for goods that are not listed in Schedule 12,
pursuant to item 12 (proposed subparagraph 16(1)(r)(ii)), if the goods
are Chinese originating goods, they become duty free upon commencement of item
12.
Schedule 3 of the Customs Tariff Act has 21
substantive sections which relate to the classification of goods and general
and special rates of duty that apply to those goods. Goods are listed according
to the Harmonized Commodity Description and Coding System (HS).[135]
Item 17 proposes to amend subsection 18(2) and
provides that if goods are Chinese originating goods, then:
- if
a rate of duty that applies in relation to the People’s Republic of China is set
out in the third column of an item in Schedule 12—by reference to that rate of
duty or
- otherwise—Free.
Items 12 and 17 therefore provide that in the event that no
rate of duty is specified in proposed Schedule 12, Chinese originating goods
will be duty free upon commencement of those items.
Items 29-33 provide minor amendments to the User’s
guide reflecting the proposed insertion of Chinese originating goods in
Schedule 12.
Item 28 – Proposed Schedule
12—Chinese originating goods
With reference to item 12, Schedule 12 is proposed to
introduce a list of goods based on the HS (in accordance with Schedule 3). Each
applicable good is listed in column 2 of proposed Schedule 12. The rate of
applicable duty to each applicable good is listed in column 3.
By way of illustration, the first Chinese originating good
listed in the proposed table of Schedule 12 in column 2 is 1202.41.00.
According to Schedule 3 of the Customs Tariff Act, the HS classifies the
good as Ground-nuts, not roasted or otherwise cooked, whether or not shelled or
broken; Other; In shell. Column 3 of proposed Schedule 12 provides that the
rate of duty applicable to that good, upon commencement of the Act, is
3.3 per cent. From 1 January of year 2 (which from item 13 means the
first calendar year after commencement), the applicable rate of duty reduces to
1.7 per cent. From 1 January of year 3 (which from item 13 means the
second calendar year after commencement), the good becomes duty free.
Schedule 12 thus provides for the inbuilt reduction of
applicable rates of duty to Chinese originating goods over time, until the
applicable duty on the good becomes nil. However, some exceptions apply.
Applicable rates of duty still apply to certain alcohol, tobacco, and petroleum
products so as to maintain excise‑equivalent rates of duty. The rates are
equivalent to the rates of excise duty payable on such goods manufactured in
Australia.
Application and transitional
provisions
Item 34 provides that the amendments made by items 1
to 17 and 21 to 28 apply in relation to:
- goods
imported into Australia on or after the commencement of this Schedule and
- goods
imported into Australia before the commencement of this Schedule, where the
time for working out the rate of import duty on the goods had not occurred
before the commencement of this Schedule.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. Free
Trade Agreement between the Government of Australia and the Government of the
People's Republic of China (ChAFTA), done at Canberra 17 June 2015,
accessed 10 October 2015.
[2]. Customs Act 1901
(Cth) and Customs
Tariff Act 1995 (Cth), accessed 20 September 2015. It should be
noted that ChAFTA itself does not need approval by the parliament. This
is because the negotiation and conclusion of treaties such as free trade
agreements are matters for the executive.
[3]. Part
VIII of the Customs Act is concerned with Customs duties, including their
payment and computation. Although subject to qualification, the general
position is that ‘the rate of any import duty payable on goods is the rate of
the duty in force when the goods are entered for home consumption’ (s 132(1)).
[4]. Part
VI of the Customs Act provides the legislative basis for Customs control over
the exportation of goods. The exportation of goods may be prohibited
absolutely, prohibited in specified circumstances, prohibited to specified
places, or prohibited unless prescribed conditions are complied with.
[5]. Schedule
4 to the Customs Tariff Act lists a range of goods in respect of which
concessional rates of import duty have been granted. Schedule 4 delivers a
range of policy objectives, including industry assistance and the implementation
of tariff concessions arising from international treaties.
[6]. Significantly,
chapter 3 of ChAFTA also sets out the methods by which exporters are to
claim their tariff concession from foreign Customs – see ChAFTA,
op. cit.
[7]. For
further detail, see Productivity Commission (PC), Bilateral
and regional trade agreements, Research report, PC, Canberra, November
2010, accessed 10 October 2015.
[8]. The
most recent round of negotiations, the Doha Round, commenced in November 2001.
The WTO’s 10th Ministerial Conference is scheduled to take place in Nairobi
from 15-18 December 2015. World Trade Organisation (WTO), ‘A package
of issues for Nairobi may be within reach’, WTO website, 17 September 2015,
accessed 23 September 2015.
[9]. As
of 7 April 2015, the WTO had received 612 notifications of regional trade
agreements, of which 406 were in force. World Trade Organisation, ‘Regional
trade agreements’, WTO website, accessed 23 September 2015.
[10]. Department
of Foreign Affairs and Trade (DFAT), ‘Free
trade agreements’, DFAT website, accessed 23 September 2015.
[11]. Senate
Foreign Affairs, Defence and Trade References Committee, Blind
agreement: reforming Australia’s treaty-making process, The Senate,
Canberra, June 2015, p. ix.
[12]. Ibid,
pp. xiii–xiv.
[13]. Ibid,
p. 77.
[14]. Ibid,
p. 78.
[15]. Ibid.
[16]. Ibid,
pp. 80–82.
[17]. PB
Butt and D Harmer (eds) LexisNexis concise Australian legal dictionary,
4th edn, LexisNexis Butterworths, Chatswood, 2011, p. 387.
[18]. Joint
Standing Committee on Treaties, Treaty
tabled on 14 August 2012 — Malaysia–Australia Free Trade Agreement done at
Kuala Lumpur on 22 May 2012, report, 130, Parliament of Australia,
Canberra, October 2012, pp. 3–4.
[19]. PC,
Bilateral
and regional trade agreements, op. cit., p. 6.
[20]. World
Trade Organisation (WTO), ‘The WTO’s
rules’, WTO website, accessed 23 September 2015.
[21]. Department
of Foreign Affairs and Trade (DFAT), ‘The
World Trade Organisation and free trade agreements’, DFAT website, accessed
23 September 2015.
[22]. General
Agreement on Tariffs and Trade (GATT) [1948] ATS 23, done at Marrakesh
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[23]. A
further rule, the national treatment rule, ensures that conditions imposed for
imported goods and services are no less favourable than those for domestically
produced goods and services.
[24]. PC,
Bilateral
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[25]. Ibid,
p. 292.
[26]. Ibid,
pp. 289–95.
[27]. Ibid,
p. XXVIII.
[28]. National
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[30]. Ibid,
pp. 8, 13–17, 18–20, 22–26.
[31]. Ibid,
p. 29.
[32]. These
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including olive oil. Ibid., pp. 17–18.
[33]. Ibid.,
pp. 20-21, 28.
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[76]. Australia
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[77]. China’s
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[78]. DFAT,
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[79]. Ibid.
According to DFAT, ‘China has retained the right to apply a discretionary
safeguard on beef (not including offal) if imports exceed a set annual
“safeguard” trigger volume. The trigger starts at 170,000 tonnes – 10 per cent
above Australia’s historic calendar year peak export levels to China – and
grows over time. There is also a set review process to consider removal of the
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[80]. DFAT,
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[81]. According
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[82]. It
may be interesting to consider what the growing demand for quality Australian
seafood by the increasing number of wealthy middle-class in China alone, might
imply for the price and/or available quantity of Australian seafood for our own
domestic market over time. Will imported cheaper seafood from Asia and other
markets feature more prominently to satisfy local demand in Australia? Will the
increased demand be environmentally sustainable?
[83]. DFAT,
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agriculture and processed food’, op. cit.
[84]. Ibid.
According to DFAT, under ChAFTA Australia will face a discretionary
safeguard on whole milk powders, with the safeguard trigger volume set well
above current trade levels and indexed to grow annually.
[85]. Ibid.
China has already invested in the Australian agricultural industry and this investment
is expected to grow even more with the ChAFTA and its lowering of
barriers to investment in Australia for a mix of private firms and sovereign
wealth funds from China. These Chinese interests along with Australian dairy
farm owners, will have the potential to sell dairy and agricultural products
back into the Chinese market. Source: D Welch, ‘China
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[119]. Ibid.
[120]. Proposed
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[121]. Proposed
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[122]. Proposed
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[123]. Ibid.
[124]. Ibid.
[125]. Proposed
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[126]. China-Australia
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a change of tariff under the Harmonized
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[127]. Proposed
subsection 153ZOE(4) of the Customs Act.
[128]. Proposed
subsection 153ZOH(2) of the Customs Act.
[129]. Proposed
section 126AOA of the Customs Act.
[130]. Proposed
subsection 153ZOB(1) of the Customs Act.
[131]. Item
3 of the Customs Bill.
[132]. Ibid.
[133]. ChAFTA,
Annex
I. See also the tariff
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