The current state of trade policies in Australia

Paul Davidson, Economics

Key Issue
Given continuing difficulty in striking multilateral agreements, Australia has increasingly pursued bilateral and regional trade agreements to further its interests.
Some issues for the 45th Parliament include whether the agreements are in the national interest, having regard to the relative magnitude of benefits generated, and additional protections provided to foreign investors. An additional issue is the recent rise in protectionist measures—partly as a result of recently formed trade agreements—and whether such measures are in the national interest.

As one of the 163 members of the World Trade Organization (WTO), Australia benefits from the most‑favoured nation and non‑discrimination provisions when engaging in international trade with other member nations. In practice, this means that Australia is treated the same as another country’s most-favoured trading partner would be, and that Australian products are treated analogously to the identical domestically produced products of our trading partners. In addition to being a WTO member, Australia has negotiated a number of bilateral and regional trade agreements with other nations (Table 1).

Table 1: Trade agreements currently in force in Australia

Agreement Entry into force
Australia New Zealand Closer Economic Relations Trade Agreement 1 January 1983
Australia-US Free Trade Agreement 1 January 2005
Australia-Thailand Free Trade Agreement 1 January 2005
Australia-Chile Free Trade Agreement 6 March 2009
Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area 1 January 2010
Singapore-Australia Free Trade Agreement 2 September 2011
Malaysia-Australia Free Trade Agreement 1 January 2013
Free Trade Agreement between the Government of Australia and the Government of the Republic of Korea 12 December 2014
Agreement between Australia and Japan for an Economic Partnership 15 January 2015
Free Trade Agreement between the Government of Australia and the Government of the People’s Republic of China 20 December 2015

Australia is currently negotiating a number of trade agreements, from separate bilateral agreements with India and Indonesia, and regional agreements with the Gulf Cooperation Council and the European Union; to multilateral agreements via the WTO on environmental goods.

In Australia and overseas, trade is currently being disrupted by a significant rise in protectionist measures. In part, these are as a direct consequence of the changing nature of trade agreements. Trade agreements now frequently provide significant trade obligations in areas such as investment, the environment, and other areas of public regulation. Protectionist measures include the application of trade-restrictive measures (particularly anti-dumping), as well as the treatment of foreign investment.

Anti-dumping measures

The latest report by the WTO on G20 trade measures highlighted that between mid‑October 2015 and mid-May 2016, some 145 new trade-restrictive measures were introduced. This was the highest number of new measures introduced since the report series begin since 2008 during the global financial crisis.

Although Australia’s initiations of anti‑dumping investigations had fallen slightly from the previous year, 17 matters were still initiated. As noted in a recent Productivity Commission (PC) report, anti-dumping measures have recently been strengthened and there have been calls to strengthen it further. A direct link was found between countries with highly protectionist anti-dumping systems and the level and value of imports subject to duties.

The PC report also found that anti-dumping measures were more than three times higher than Australia’s remaining maximum tariff rates. Anti-dumping measures were mainly imposed on base metals, paper and wood, and plastics and polymers products. In particular, it was noted that Australian anti‑dumping measures currently in force are predominantly in the steel sector.

Foreign investor protections

Concerns have been raised by a number of academics, the Productivity Commission, and even the Chief Justice of the High Court about protections granted to foreign investors under trade agreements, principally investor‑state dispute settlement (ISDS) provisions.

ISDS provisions in trade agreements provide a mechanism for foreign investors (including Australian investors investing overseas) to seek recourse in an international tribunal in the event that a host government to the agreement breaches its investment obligations.

Trans-Pacific Partnership (TPP)

One of the most high-profile trade agreements—the Trans-Pacific Partnership (TPP)—contains ISDS provisions. The TPP was signed on 4 February 2016 and includes 12 signatories: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States, and Vietnam. These 12 nations account for around 40 per cent of global GDP.

Although concerns have been raised, many of Australia’s existing trade agreements contain ISDS provisions, including some with other TPP nations. Of the ten trade agreements above, only the agreements with New Zealand, Malaysia, the United States, and Japan do not contain ISDS clauses. Table 2 illustrates that Australia already has ISDS provisions with the vast majority of TPP nations.

A provision in the TPP provides that the agreement cannot enter into force without the acquiescence of the United States (and also Japan). However, the TPP has faced staunch opposition in the United States and its passage through the current Congress is in doubt. Both American presidential nominees have explicitly ruled out adopting the TPP in its current form. There have therefore been calls from some quarters, including Australia’s Ambassador to the United States, for the TPP to be passed during a ‘lame duck’ session of Congress, which occurs between the presidential election on 8 November and the inauguration of the new president on 20 January 2017.

Table 2: Existence of ISDS provisions with TPP nations, outside of the TPP agreement

TPP country ISDS provisions currently exist in: ISDS provisions in force, ignoring the TPP
Bilateral Investment Treaty Australia-New Zealand-ASEAN Agreement Bilateral trade agreement
Brunei Darussalam n/a n/a
Canada n/a n/a
Chile
Japan n/a ✘* ✘*
Malaysia
Mexico n/a
New Zealand ✔**
Peru n/a
Singapore
United States ✘* ✘*
Vietnam n/a

n/a means not applicable.
* ISDS provisions are not explicit although there is explicit scope for their future inclusion in the trade agreement.
** Does not apply between Australia and New Zealand.

Further reading

Chief Justice Robert French AC, ‘Investor-State Dispute Settlement—a cut above the courts?’, Supreme and Federal Courts Judges Conference, Darwin, 9 July 2014.

Productivity Commission, Bilateral and regional trade agreements, Research report, Canberra, 2010.

Productivity Commission, Intellectual property arrangements, Draft report, Canberra, 2016.

 

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