Bills Digest no. 31 2014–15
PDF version [1 MB]
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.
Juli Tomaras, Law and Bills Digest Section
Tarek Dale, Economics Sect
6 May 2014
This is a revised version of the Digest published on 30
September 2014.
Contents
Purpose of the Bill
Structure of
the Bills
Parliament’s
role in treaty negotiations and ratification
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 (Korea-Australia Free Trade Agreement
Implementation) Bill 2014
Main
provisions of the Customs Tariff Amendment (Korea-Australia Free Trade
Agreement Implementation) Bill 2014Appendix A:
Investor State Dispute Settlement
Appendix B:
Intellectual property in KAFTA
Date introduced: 4
September 2014
House: House of
Representatives
Portfolio: Immigration
and Border Protection
Commencement: The
operative provisions of both Bills will commence from the later of 1 December
2014 and the day on which the KAFTA comes into force for Australia. Both
Australia and Korea are currently aiming for entry into force before the end of
2014.
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 (Korea-Australia Free Trade Agreement Implementation) Bill 2014
and the Customs
Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill
2014, 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 Bill
The Customs Amendment (Korea-Australia Free Trade Agreement)
Bill 2014 (the Customs Bill) and the Customs Tariff Amendment (Korea-Australia
Free Trade Agreement) Bill 2014 (the Tariff Bill) are implementing Bills for
the Korea-Australia Free Trade Agreement (KAFTA). Their passage is required
before the KAFTA can come into effect.
Their primary purpose is to implement the customs dimension
of KAFTA by making relevant amendments to the Customs Act 1901
and the Customs
Tariff Act 1995.[1]
The Customs Bill inserts a new Division 1J to Part VIII of the Customs
Act providing for:
- rules
of origin for goods imported into Australia from Korea: imported goods that
satisfy the new rules as 'Korean originating goods' will be eligible for
preferential rates of customs duty
- rules
relating to the export of goods to Korea: rules regarding record keeping and
other obligations, which will apply to persons exporting goods to Korea and
wanting to obtain preferential treatment for them in Korea, and on producers of
such goods.
The Tariff Bill contains amendments to the Customs Tariff
Act to implement the KAFTA by:
- giving
free rates of customs duty for certain ‘Korean originating goods’ in conformity
with and as a consequence of the new Division 1J of Part VIII of the Customs
Act
- amending
Schedule 4 to the Customs Tariff Act to maintain customs duty rates for
certain Korean originating goods in accordance with the applicable concessional
item[2]
- phasing
the preferential rates of customs duty for certain ‘Korean originating goods’ to
be ‘free’ of customs duty by 2021
- inserting
a new Schedule 10 in the Customs Tariff Act to implement
preferential tariff rates, and also phasing rates of duty so as to achieve
parity with rates of duty that would be payable if those particular products
were manufactured in Australia.
The Customs Bill has one Schedule, which is comprised of
three Parts:
- Part
1 deals with Korean originating goods or the ‘rules of origin’, which determine
whether goods are eligible for the preferential tariff rates
- Part
2 deals with the conferring of ‘verification powers’ in relation to certain
trade items (implementing Article 3.23 of KAFTA),[3]
and
- Part
3 contains application provisions.
The Tariff Bill has one schedule, which makes various
consequential amendments to the Customs Tariff Act, including inserting
a new Schedule 10 into that Act, which specifies the preferential tariff rates
available to Korean goods under KAFTA.
Parliament’s role in treaty negotiations and
ratification
The constitutional system in Australia enables the Executive
Government to commit Australia to treaties at the international level. As
outlined in a presentation by an official from the Attorney-General’s
Department:
The conclusion of and accession to treaties, be they
multilateral or bilateral, is a matter for the Government of the day in the
exercise of the executive power of the Commonwealth conferred by section 61 of
the Constitution. Government negotiation of, or agreement to, international
treaties is normally considered by Cabinet.
The Federal Executive Council, established under section 62
of the Constitution must approve Australia’s entry into treaties. The
responsibility for making recommendations to the Executive Council with respect
to the issuance of full powers, signature, accession, ratification, termination
and amendment of treaties rests with the Minister for Foreign Affairs.[4]
Having become a party to the treaty, the Government is then
able to rely upon the external affairs power in section 51(xxix) of the Constitution,
which enables Parliament to enact legislation that may otherwise be outside its
legislative power.
The process by which a treaty enters into force, and the
relationship between the powers of the Parliamentary and the Executive branch,
can be complex, and has been examined in a number of reports – most recently in
the report by the Joint Standing Committee on Treaties on the Treaties
Ratification Bill 2014, and in the Productivity Commission’s 2010 report.[5]
Concern has been expressed about this system in terms of the transparency and
opportunity for input and amendment by the Parliament and a number of proposals
have been suggested for reform.
Although the two Bills covered by this Bills Digest only
make changes to tariff rates and the rules of origin, they are a necessary
step, and likely the one involving the most significant Parliamentary
involvement, prior to the final ratification of KAFTA.
Australian and international trade
policy
Australia has a long history of supporting trade
liberalisation. It has worked through multilateral trade forums such as the
World Trade Organisation (WTO), and undertaken unilateral tariff reduction.[6]
While commitments made under WTO agreements are an
important part of the international trade framework, in recent years regional
trade agreements (including both free trade agreements and customs unions) have
increased significantly. As of 15 June 2014, the WTO had received 585
notifications in relation to regional trade agreements.[7]
One contributing factor to the increase in agreements is the failure of the
multilateral system; the WTO’s Doha Round of negotiations, started in 2001, is
stalled, and the recent attempt to achieve agreement on a smaller subset of
issues also appears to have foundered.[8]
Australia has followed the global trend, and entered into
a number of agreements over the last decade. Prior to 2003, its only agreement
was with New Zealand, but since then it has entered agreements with Singapore,
Thailand, America, Chile, Malaysia, and a regional free trade agreement with
the Association of South-East Asian Nations and New Zealand.[9]
Free trade agreements
What is a free trade agreement?
The Productivity Commission noted in a 2010 report that the
‘terms bilateral trade agreement, regional trade agreement, free trade
agreement, reciprocal trade agreement and preferential trade agreement are used
at different times and in different ways’.[10]
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 more than two states and are often used to
establish a collective set of rules governing conduct in a particular area.[11]
Bilateral trade agreements (between two states) establish a system of mutual
benefit in respect of trade and investment and are often known as free trade
agreements (FTAs).[12]
The Productivity Commission noted in its 2010 report that:
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 ...[13]
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’.[14]
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’.[15]
While trade in goods and services remains a key focus for
FTA negotiations, there is an increasing trend for FTAs to include commitments
in a wide range of other areas. This can include binding commitments on
investment, government procurement, intellectual property, competition policy,
labour and environmental issues, and a range of others.[16]
Free trade agreements and
diplomatic relations
The Joint Standing Committee on Treaties noted in its report
on KAFTA that ‘A comprehensive free trade agreement with Korea is expected to further
strengthen the broader bilateral relationship between Australia and Korea ...’.[17]
In its report on FTAs, the Productivity Commission discussed
the inclusion of strategic or diplomatic goals as objectives in negotiating
FTAs, and argued that where an FTA was not of economic benefit to Australia, it
should not be pursed for diplomatic reasons which could be achieved through
other methods.[18]
Consultation
Treaty negotiations are confidential, but the Department of
Foreign Affairs and Trade receives submissions, and consults with industry
stakeholders during the negotiation process. The Joint Standing Committee on
Treaties noted in its report that it had received ‘conflicting evidence on the
amount of industry and stakeholder consultation that took place during the
negotiation process for KAFTA’.[19]
Estimating the economic benefits of free
trade agreements
Proponents of free trade agreements typically refer to the
economic benefits that are likely to flow from an agreement. There are a number
of contentious issues in relation to modelling the benefits of FTAs, including
both the point in time at which modelling is completed, the aspects of the
agreement which are included, and the methods used.
For many FTAs modelling has been undertaken prior to
entering FTA negotiations, meaning that it is both out of date and may not
accurately reflect the final form of the agreement.[20]
Initial analysis conducted in 2008 suggested that an FTA with Korea could add USD
$450 m to Australia’s GDP in 2020; more recent modelling suggests that the FTA
will add AUD $650 m to Australia’s GDP in 2030.[21]
Official documents relating to KAFTA appear to refer to the more recent
modelling.[22]
The most recent modelling is based purely on expected
changes in merchandise trade; that is, it does not attempt to estimate the
costs or benefits associated with other commitments in the agreement, including
those related to Investor- State Dispute Settlement (ISDS) or intellectual
property (IP) law.[23]
The Productivity Commission has previously noted that stronger IP requirements
associated with the Australia‑United States FTA ‘imposed a net cost on
Australia’, and also in the United States, ‘reflecting adverse impacts on
consumer welfare.’[24]
In line with this, the Productivity Commission also argued that ‘any IP
provisions that are proposed for a particular agreement should only be included
after an economic assessment of the impacts, including on consumers, in
Australia and partner countries’.[25]
KAFTA was submitted to the Joint Standing Committee on
Treaties. The Senate Foreign Affairs, Defence and Trade References Committee is
also conducting an inquiry into KAFTA, and the Bills were reported on by the
Senate Legal and Constitutional Affairs Legislation Committee.
In addition, the Senate Foreign Affairs, Defence and Trade
Legislation Committee examined the Trade and Foreign Investment (Protecting the
Public Interest) Bill 2014, which included some discussion of KAFTA.[26]
Joint Standing Committee on
Treaties (JSCOT)
The Joint Standing Committee on Treaties completed its
inquiry into the KAFTA on 4 September 2014. The Committee report supported the
agreement, and recommended that ‘binding treaty action be taken’.[27]
A dissenting report by Kelvin Thomson and Melissa Parke, two
Labor members of JSCOT, stated they could not support the agreement, and
recommended renegotiation on ‘ISDS, Copyright, Rules of Origin and Labour
Market Testing’.[28]
A dissenting report by the Australian Greens likewise did
not support the KAFTA in its current form.[29]
The Australian Greens stated they support trade and investment flows between
countries that constitute ‘fair trade’. However they strongly oppose the
inclusion of ISDS clauses in FTAs and believe that the inclusion of ISDS
clauses sets a dangerous precedent and undermines Australia’s sovereignty.[30]
(See Appendix A to this Digest for information on ISDS
provisions.) Notwithstanding the insertion of exclusions and safeguard clauses
in KAFTA as a means of reducing the risk of legitimate public policy
initiatives (in areas such as health, environment and so on) being impacted by
foreign corporate litigation, the Green’s point to Dr Kyla Tienhaara’s analysis
of the drafting of KAFTA. Dr Tienhaara stressed that ‘dangerous loopholes in
the text of KAFTA remain despite the government's efforts to preserve the right
to regulate under the agreement’.[31]
The Greens raised intellectual property concerns about the
‘potential threat to access to reasonably priced medicines and failure of the
agreement to not recognise the broader public interest in access to knowledge
and information’.[32]
They were also concerned about the ‘impacts of this trade deal on the car
industry, and what it has cost [Australia], workers and communities’.[33]
In terms of the process for negotiating and influencing the
terms of KAFTA, the Greens were critical of the secrecy of the negotiations and
the lack of ability to negotiate, influence and amend the terms of the
agreement.[34]
Senate Foreign Affairs, Defence and
Trade References Committee
The Senate Foreign Affairs, Defence and Trade References
Committee examined the KAFTA, and is expected to report within one month of the
JSCOT report.[35]
Senate Legal and Constitutional
Affairs Legislation Committee
The Senate Legal and Constitutional Affairs Legislation
Committee tabled its report on 24 September 2014. The Committee recommended
that the Bill be passed as soon as possible because:
the Korean tariffs on a number of Australian originating
goods would drop immediately upon entry into force of KAFTA and thereafter on 1
January each year. If KAFTA enters into force before the end of 2014, the
tariffs would drop on entry into force and again on 1 January 2015. If KAFTA
does not enter into force until 2015, the tariff reductions would effectively
be delayed by a year for the life of the tariff reduction period. [36]
The Committee also concurred with the suggestion by the Customs
Brokers and Forwarders Council of Australia and the Export Council of Australia
that:
the Australian Customs and Border Protection Service makes
publicly available a table which refers to each of the specific provisions of
Chapters 3 and 4 of KAFTA and which also identifies where those provisions have
been adopted or are proposed to be adopted whether in the Bills, otherwise in
legislation or regulations or by procedure; and ...
the Commonwealth government ensure that the provisions of
KAFTA have been properly accommodated in Australian law and practice.[37]
In their dissenting report, the Australian Greens stated that
‘there are many elements of KAFTA [they] support such as the increased market
access for beef, cheese and wine products’.[38]
However they also appreciate that the scope of the inquiry was narrow and limited
to the specific provisions and associated issues in the two Bills. As such, the
inquiry excluded from its considerations issues considered to be of significant
concern and which the Greens oppose. Those issues include: ‘Investor State
Dispute Settlement Clauses, flawed intellectual property provisions and a
continuing flawed process in the consultation and negotiation phase of trade
agreements’. The Greens discuss these issues in detail in the Joint Standing
Committee on Treaties (JSCOT) dissenting report.[39]
The Australian Labor Party (ALP) initiated FTA negotiations
with the Republic of Korea while in Government, but the ALP’s policy of not
agreeing to include ISDS clauses in FTAs may have contributed to the delay in
concluding negotiations. [40]
Two ALP members of JSCOT issued a dissenting report that did not support the
KAFTA in its current form. A subsequent press release by the Opposition Leader
stated that ‘Labor will support legislation implementing the Korea-Australia
Free Trade Agreement’.[41]
The Australian Greens issued a dissenting report on the
JSCOT inquiry into KAFTA, which did not support KAFTA in its current form.[42]
Greens Senator Whish-Wilson is particularly opposed to the
use of ISDS provisions in FTAs. On 5 March 2014, Senator Whish-Wilson
introduced into Parliament the Trade
and Foreign Investment (Protecting the Public Interest) Bill 2014.[43]
The purpose of this Private Senator’s Bill is to preclude the Commonwealth from
entering into FTAs which contain ISDS provisions. The basic rationale for the Bill
relates to Australia’s basic sovereign right, ‘Parliaments should be free to
[legitimately] set laws that protect the public and the environment without fear
of the government being sued by corporations’.[44]
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 has 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.’[45]
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. [46]
... legislation was perhaps not the best mechanism by which to
address the concerns raised about risks associated with ISDS provisions. [It
believed that the] risks associated with ISDS can and should be managed more
effectively and in ways which do not require legislation, including careful
treaty drafting [...] and development of a well-balanced Model Investment Treaty.[47]
While Senator Whish-Wilson’s concern is for the Parliament
not to be constrained in making laws on a range of non-trade policy issues, the
majority report of the Committee emphasised the constraint that a ban on the
inclusion of ISDS clauses in FTAs would place:
... on the ability of Australian governments to negotiate trade
agreements that benefit Australian business.[48]
In their dissenting report, the Greens argued that this Bill
was perhaps the best mechanism by which to address the concerns raised about
risks associated with ISDS provisions until the Government and the Minister
[for Trade] could demonstrate that they had an effective mechanism or were
willing to develop such a mechanism.[49]
Senator Nick Xenophon has expressed opposition to FTAs that
could damage the Australian automotive manufacturing industry.[50]
Senator John Madigan has previously commented on the importance of supporting
local industry, and that ‘Having completely unrestricted imports is a naive
purist ideal that does not reflect the reality of world trade ... We shouldn’t do
it’.[51]
Senator David Leyonhjelm has previously written in support of free trade, but
expressed reservations about free trade agreements.[52]
Agricultural producers
A large number of agricultural exporters expressed support
for KAFTA, citing the likely increases in exports following reduction of Korean
agricultural tariffs. Agricultural producers such as the Almond Board of
Australia, Australian Macadamia Society, Australian Nut Industry Council,[53]
Cherry Growers Australia and Citrus Australia all supported the agreement.[54]
Industry bodies in the livestock industry also support the
agreement, including the Sheepmeat Council of Australia, Australian Pork,
Australia Lot Feeders’ Association, Meat and Livestock Australia, and the
Cattle Council of Australia[55].
Meat and Livestock Australia stated:
KAFTA is critical to the long term positioning of Australian
red meat in Korea, with a liberalised import regime providing a major boost to
trade ... The critical requirement now is to ensure that KAFTA enters into force
in calendar year 2014.[56]
The dairy industry also supports KAFTA. A joint submission
by the Australian Dairy Industry Council and Dairy Australia stated:
The Australian dairy industry supports the signing of the
Korea Australia Free Trade Agreement ... The Australian dairy industry urges the
Australian Government to undertake to expedite entry into force of the Korea
Australia Free Trade Agreement, certainly before the end of the 2014 calendar
year.[57]
The Australian Food and Grocery Council supported the
agreement, stating:
The Australian Food and Grocery Council welcomes the
Korea-Australia Free Trade Agreement (KAFTA), and the improved market access
arrangements for one of the most distorted agri-food markets in the world.
While not a perfect outcome, the scheduled tariff reductions
across a wide range of agri-food products are welcome and will provide relief
to Australian exporters facing fierce competition in Korea, and strong domestic
cost pressures.[58]
AUSVEG, the national peak industry body representing
Australian vegetable and potato growers, was supportive of the agreement.
AUSVEG’s submission to the JSCOT stated:
... the KAFTA tariff outcomes represent a generally favourable
outcome for the Australian vegetable industry, particularly the removal of the
tariff on potatoes in Australia’s export season. While vegetable tariff
outcomes were not as favourable as those provided for in the Korea-U.S. FTA,
the relatively early conclusion of KAFTA negotiations is reasonably expected to
provide Australia with some level of advantage against other competitors in the
Korean market ... The existence of phytosanitary related trade barriers
diminishes market access and therefore the potential of vegetable trade
liberalisation under Australia’s FTAs.[59]
The New South Wales Farmers’ Association and National
Farmers’ Federations support the agreement.[60]
The National Farmers’ Federation stated:
... the agreement represents a strong step towards securing
Australia’s important trading future with Korea and in improving international
market access for Australian agricultural goods ... The agreement gives
Australian farmers and exporters significantly improved market access in goods
eliminating high tariffs on a wide range of products, including beef, wheat,
sugar, dairy, wine, horticulture and seafood.[61]
Canegrowers Australia, the Australian Sugar Industry
Alliance, Australian Sugar Milling Council and Queensland Sugar Limited were
all supportive of KAFTA.[62]
The Australian Sugar Industry Alliance noted that: ‘South Korea is the largest
export market for Australia’s raw sugar ... Removing the raw sugar tariff as soon
as the agreement enters into force will provide a significant boost to
Australia’s raw sugar exports.’[63]
The Winemakers Federation of Australia and Wine Australia
both support the agreement.[64]
The Winemakers Federation of Australia commented:
Australia is the sixth-largest wine exporter to South Korea.
Australian sparkling, red and white wines are currently subject to a tariff of
15 per cent but wine from the US, EU and Chile enter duty free. The FTA will
provide a boost to the wine industry, whose exports to Korea have been steadily
decreasing since 2007. With this deal, Australian wines have the best chance to
take advantage of a growing market.[65]
Trade unions
A number of trade unions expressed opposition to KAFTA, both
because of trade impacts and because of the inclusion of the ISDS provisions.
A press release by the Australian Council of Trade Unions
(ACTU) quoted ACTU president Ged Kearney:
This disgraceful deal will not only cost thousands of
Australian manufacturing jobs, it also leaves the door open to imports from
parts of North Korea that are not subject to labour standards and which are
notorious for forced and prison labour.[66]
The Australian Manufacturing Workers’ Union does not support
the agreement, describing it as an:
... agreement that favours natural resource endowment sources of
comparative advantage at the expense of more sophisticated, advanced and value
adding industries and sources of advantage. As such, it will undermine the
complexity and advanced industry basis of the economy, putting the prosperity
of all Australians in jeopardy ... its inclusion of an ISDS provision undermines
the sovereignty of the Australian people, places unnecessary and damaging
restrictions on future social policies and places Australian firms at a
competitive disadvantage as compared to foreign based firms.[67]
The Construction, Forestry, Mining and Energy Union (CFMEU)
was particularly concerned with the movement of natural persons provisions in
KAFTA, and stated that the agreement ‘risks undermining a “fair go” for
Australian workers and manufacturers in a range of ways’.[68]
The New South Wales Nurses and Midwives’ Association does
not support the agreement while it contains ISDS provisions, stating:
The inclusion of ISDS within any free trade agreement clearly
exposes the Australian health care system. This places at risk future
initiatives around food and beverage labelling, regulation of health
professionals, health care delivery and environmental standards. To include
ISDS processes could be seen as government acting in the interests of investors
over the rights of our community, our health and our environment ... The
Association seeks that the KAFTA is not approved until such time that ISDS
provisions are removed. Australian Governments must have the ability to
legislate domestically without fear of being sued for simply acting in the
interests of our health, our environment and our future.[69]
Industry organisations
A number of industry organisations were broadly supportive
of the agreement. The Australian Chamber of Commerce in Korea views:
... the conclusion of this agreement as a significant milestone
for the Australia-Korea partnership and the bilateral business community. This
is a balanced, comprehensive and high quality free trade agreement that
substantially liberalises trade between Australia and Korea. It will strengthen
and expand opportunities for Australian companies doing business with Korea and
open up new opportunities for businesses to enter the Korean market. It
contains significant benefits for Korean companies looking to invest in Australia
including enhanced investment protection mechanisms and a raising of the
foreign investment review threshold.[70]
The Australian Chamber of Commerce and Industry noted
concerns over the complexity of the rules of origin, particularly in
conjunction with differing rules of origin in other agreements, but supports
the agreement as a whole.[71]
The Australian Industry Group raised concerns over the rapid
reduction in Australia tariffs under the agreement, with potential impacts for
manufacturing, and noted that industry members were often unaware of the
details of the agreement which might impact them until the final text was
signed. Despite these particular reservations, the Australian Industry Group
supports the ratification of the agreement.[72]
The Business Council of Australia supports the agreement. Its
submission to the JSCOT stated:
KAFTA is unambiguously good news for the Australian economy.
It is a high-quality, comprehensive agreement that substantially liberalises
trade with Australia’s fourth largest trading partner, our third largest export
market (goods and services, 2012–13) and a substantial source of overseas students,
tourists and investment ... The BCA strongly supports an early entry into force
for KAFTA; the sooner the agreement enters into force, the sooner the
Australian economy will start benefiting from increased trade and investment
flows resulting from the agreement.[73]
The Minerals Council of Australia supports the agreement. Its
submission to the JSCOT stated:
The Minerals Council of Australia strongly supports the
Korea-Australia Free Trade Agreement (KAFTA). It combines all the principal
elements of a substantial FTA between two significant economies that have an
important and growing trading relationship ... the agreement liberalises market
access for goods and services, and opens up new opportunities for investment.
It also introduces more liberalising approaches across rules (such [as] rules
of origin and technical barriers to trade) and cross cutting issues (such as
trade facilitation, cooperation and competition) ... No other alternatives to
KAFTA exist at present to achieve these outcomes. The Doha Round of
Multilateral Trade Negotiations is on virtual life support. Regional
Comprehensive Economic Partnership (RCEP) negotiations are still at an early
stage and their ambition is yet to be determined. And Korea is not a party to
Trans Pacific Partnership (TPP) negotiations, although it is interested in
joining them at some stage. KAFTA is the right agreement at the right time.[74]
The Export Council of Australia, a peak body for importers
and exporters, ‘strongly supports KAFTA and the early entry into force of
KAFTA’.[75]
The Financial Services Council supports the agreement, describing the KAFTA as
‘a high quality agreement [that] provides opportunities for all Australian
industries including financial services’.[76]
Professional bodies
Engineers Australia is supportive of the agreement, noting
the potential for international employment:
Engineers Australia sees the Korea FTA as invaluable in
facilitating the international cooperation and labour mobility that our
profession relies upon so heavily ... Engineers Australia remains strongly
supportive of the Australian Government’s efforts in negotiating the Korea FTA,
and we congratulate the Government on achieving this important milestone.[77]
Music Rights Australia, representing ‘songwriters and music
publishers’, provided a submission in support of articles 13.9.28 and 13.9.29
(both relating to stronger intellectual property online).[78]
Community organisations
A number of community organisations were opposed to KAFTA’s
implementation, with particular concerns raised around the ISDS provision and
intellectual property clauses.
Australian Digital Alliance
The Australian Digital Alliance is a ‘non-profit coalition
of public and private sector interests formed to promote balanced copyright law
and provide an effective voice for a public interest perspective in the
copyright debate’.[79]
The Australian Digital Alliance does not support the IP commitments in KAFTA,
stating concerns that the agreement:
extends our international obligations;
is being used as a means to change domestic policy;
restrains our flexibility to adjust copyright policy in the
future;
lacks balance, or even a recognition that the public interest
may not always align with the rigid enforcement of IP rights;
is not based on any economic evidence or cost benefit
analysis; and
ignores recommendations from previous committees and reviews.[80]
Australian Fair Trade and Investment Network
The Australian Fair Trade and Investment Network (AFTINET)
is a network of community organisations, including church groups, unions,
environmental and public health organisations, ‘aid and development
organisations and human rights organisations’.[81]
AFTINET argued against the agreement for a number of reasons: the inclusion of
an ISDS clause, material on intellectual property, the weakness of chapters on
environmental and labour provisions, and the lack of reciprocity on labour
market testing. [82]
In Committee hearings, the AFTINET Convenor stated that the group considers
that ‘there are a number of problems with this agreement and that it is not in
the national interest. We are recommending against ratification’.[83]
Conference of Leaders of Religious Institutes NSW
The Conference of Leaders of Religious Institutes NSW does
not support the agreement, stating:
CLRI NSW does not support the inclusion of ISDS in any trade
agreement. CLRI NSW believes that the Australian government should not enter
into a Free Trade Agreement with Korea because it includes investor state
dispute settlement provisions (ISDS) ... It is unacceptable for foreign
corporations to be able to mount legal challenges against governments over
policies or laws which they perceive to affect the value of their investments.[84]
Electronic Frontiers Australia
Electronic Frontiers Australia, an ‘organisation
representing Internet users concerned with on-line freedoms and rights’, did
not support the IP approach taken in the agreement, arguing that the final
content ‘has introduced many redundant requirements that will serve only to
complicate and constrain the evolution of domestic IP policy’.[85]
The Explanatory Memoranda to the Bills show that the
tariff concessions on Korean goods are expected to reduce revenue by the
amounts in the table below ($635m over the forward estimates). These costs
relate directly to tariffs on merchandise goods; the costs and benefits
associated with other aspects of the KAFTA are not included in this analysis
(see Estimating the economic benefits of
free trade agreements, above and Gains under
KAFTA, below).
Table 1 Underlying cash impact ($ millions)
2014–15
|
2015–16
|
2016–17
|
2017–18
|
Total
|
-100.0
|
-165.0
|
-180.0
|
-190.0
|
-635.0
|
Source: Explanatory Memorandum, Customs
Tariff Amendment (Korea-Australia Free Trade Agreement Implementation) Bill
2014, p. 2.
The Statements of Compatibility with Human Rights can be
found at page 27 of the Explanatory Memorandum to the Customs Bill, and page 3
of the Explanatory Memorandum to the Tariff Bill.
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
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 the Bills are compatible.
The Parliamentary Joint Committee on Human Rights has
concluded its examination, and considers that the Bills are compatible with
human rights.[86]
Implementing legislation and the
KAFTA
As outlined above (Parliament’s
role in treaty negotiations and ratification), while treaty-making power
rests with the executive, implementing legislation must pass the Parliament
before the KAFTA can be ratified and enter into force.
The National Interest Analysis submitted by the Government identifies
a number of changes that will be required to implement the KAFTA:
- amendments
to the Customs Act 1901 and the Customs Tariff Act 1995 (which is
the purpose of these two Bills), and the Customs Regulations 1926
- new
customs regulations to implement the KAFTA rules of origin
- amendments
to the Foreign Acquisitions and Takeovers Regulations 1989 (to
implement a higher threshold for screening Republic of Korea investors)
- amendments
to the Life Insurance Regulations 1995 to implement the agreement
enabling Korean insurers to operate in Australia through branches rather than
subsidiaries and
- amendments
to the Copyright Act 1968 (this change is contentious, and is discussed
in more depth in the section on intellectual property below).[87]
Of this list of required amendments, the only items
requiring legislative amendment (and hence the passage of legislation) are the
two Bills covered by this digest, and the potential changes to the Copyright
Act. The other changes require amendments to regulation, and there is some
debate over whether changes to the Copyright Act are required by the
KAFTA.
Thus, although the two Bills covered by this Bills Digest
only make changes to tariff rates and the rules of origin, they are a necessary
step, and potentially the one involving the most significant Parliamentary
involvement, prior to the final ratification of the agreement.
Concern has been raised by the Export Council Association
and the Customs Brokers and Forwarders Council of Australia that many of the changes
to the law required to implement the KAFTA are intended to be contained in
Regulations and have not been subject to Parliamentary inquiry and scrutiny.[88]
In paragraph 3.7 of its submission, the Export Council of Australia provides a
list of examples where it believes that the Customs Bill may not address many
of the actual provisions of KAFTA.[89]
The Korea-Australia Free Trade
Agreement
Background
An initial evaluation of the potential gains from a free
trade agreement between Australia and Korea was released in April 2008, and
negotiations began in May 2009.[90]
In 2011 the former Labor Government released a trade policy
statement that included a commitment not to include an ISDS in future
agreements.[91]
Media commentary and statements by officials suggest that the inclusion of an
ISDS clause in KAFTA was a key requirement for Korea.[92]
During the 2013 election, the Coalition announced that it would
consider the inclusion of ISDS as part of trade agreements.[93]
The conclusion of KAFTA negotiations was announced in December 2013; the
agreement was signed in April 2014 and tabled in May 2014.[94]
Korea’s economy and trade with
Korea
The Republic of Korea is a fast-growing economy, with real
GDP growth estimated at 3.5 per cent in 2014 and 4.1 per cent in 2015.[95]
Manufacturing accounts for around a third of Korea’s GDP, and is supported over
services to some extent by the Korean government.[96]
Exports are a key economic driver for Korea, particularly for manufactured
goods such as cars, ships, and mobile devices.[97]
Tariffs – particularly in agriculture – have been an
important revenue source for the Korean government, and there is still some
government involvement in the economy.[98]
Australia has a significant trading relationship with South
Korea. South Korea is Australia’s fourth-largest overall trading partner (based
on two-way trade) and South Korea is Australia’s third-largest goods export
market.[99]
Australia primarily exports commodities (both agricultural and mineral), while
Korea exports manufactured goods.[100]
Tariff reductions
A key component of the KAFTA is the reduction, by both
Australia and Korea, of tariffs on a wide range of merchandise goods. Evaluating
the total level of tariff reductions is complex, because of the wide range of
goods covered, and the varying tariff levels. The Regulatory Impact Statement
(RIS) accompanying the KAFTA includes a summary of the agreement’s phasing out
of tariffs over time, outlined in the figure below. Among a range of tariff
reductions, Korea will eliminate tariffs on Australian raw sugar, wheat and
wine on entry into force, and progressively for beef products – key tariff
reductions are outlined in the table below.[101]
Figure 1 Tariff reductions under KAFTA: exports by
value
Source: Department of Foreign Affairs and Trade (DFAT), Korea-Australia
Free Trade Agreement: Regulation Impact Statement, 4 February 2014,
accessed 24 September 2014, Tables 1 and 3, p. 7-9. MFN = ‘most favoured
nation’, i.e. the tariff rate that currently applies before any reductions
under KAFTA.
Table 1 Key Korean tariff reductions under KAFTA
Agricultural
exports to Korea
|
Resources,
energy and industrial exports to Korea
|
Product
|
Korea’s MFN
tariff (per cent)
|
$m (2012-13)
|
Years to
tariff elimination
|
Product
|
Korea’s MFN
tariff
|
$m (2012-13)
|
Years to
tariff elimination
|
Beef
|
40-72
|
703
|
15
|
Crude petroleum
|
3
|
1,534
|
5
|
Sugar, raw
|
3
|
461
|
0
|
Natural gas
|
3
|
701
|
0
|
Wheat
|
1.8
|
449
|
0
|
Unwrought aluminium
|
1 and 3
|
677
|
0
|
Fodder
|
100.5
|
149
|
15
|
Propane, butane
|
3
|
236
|
0
|
Malt and malting barley
|
269 and 513
|
88
|
15
|
Gold
|
3
|
209
|
0
|
Dairy
|
36-176
|
80
|
3-20; some duty
free quotas
|
Ammonia
|
1 and 2
|
196
|
0
|
Canola oil
|
8-10
|
26
|
5-10
|
Sea salt
|
1
|
90
|
0
|
Maize
|
328
|
20
|
7
|
Unwrought lead
|
1 and 3
|
90
|
10
|
Sheepmeat
|
22.5
|
18
|
0
|
Cobalt mattes and articles
|
3
|
35
|
0
|
Wine
|
15
|
10
|
5
|
Titanium dioxide
|
6.5
|
8
|
0
|
Source: Department of Foreign Affairs and Trade (DFAT), Korea-Australia
Free Trade Agreement: Regulation Impact Statement, 4 February 2014,
accessed 24 September 2014, Table 2, p. 7-8.
‘Sensitive’ products
While tariffs have been reduced on a range of goods, 171 of
Korea’s ‘most sensitive products ... receive no tariff concessions’.[102]
These include rice, walnuts, milk powders, honey, abalone and ‘certain wood
products’.[103]
In its submission to the Joint Standing Committee on
Treaties, the Australian Dairy Industry supported the ratification of KAFTA
because of tariff advantages it would bring, ‘with the notable exception being
milk powder’.[104]
The Australian Nut Industry Council supported the
ratification of KAFTA, but described the decision not to reduce tariffs on
walnuts as ‘bewildering’, and noted that Korea had removed tariffs on walnuts
in its FTAs with the US and Chile.[105]
Timing concerns
A concern raised by a number of stakeholders was the timing
of the agreement. The timetable of the tariff reductions is such that tariff
reductions occur on 1 January of the relevant year (i.e. year three or five of
the agreement).[106]
This means that for staged tariff reductions, if the agreement enters into
force in 2014, then 1 January 2015 will be the second year of the
agreement. A number of stakeholders noted a preference for the agreement
entering into force in 2014, to enable a quicker timetable of tariff
reductions.[107]
Meat and Livestock Australia estimated that the difference in tariffs between
the agreement entering into force in 2014 rather than in 2015 would be $408m
over 15 years.[108]
Economic gains under KAFTA
Estimating the gains from free trade agreements is
complex, as discussed by the Productivity Commission in its 2010 review (see
also discussion above, Estimating the
economic benefits of free trade agreements, above).[109]
The Government has tabled modelling that suggests that when fully implemented,
merchandise trade increases as a result of KAFTA may reach $653m annually in
increased Australian gross domestic product.[110]
Using static analysis (based on current trade flows, not estimating any changes
in trade flow as a result of tariff reductions), the New South Wales
Parliamentary Library estimated that in 2035, Australian exporters will receive
an additional $603m annually as a result of tariff reductions.[111]
Benefits to agricultural producers
During the JSCOT inquiry, a number of agricultural producers
noted that they expected to benefit from the ratification of the agreement:
- Dairy
Australia estimated that in the first year of the agreement, the tariff savings
would be on the order of $7.6m.[112]
- A
representative from the meat and livestock industry estimated that without the
agreement, the industry would have lost $1.4b over 15 years, if US producers
faced a reducing tariff but there were no concessions for Australian producers.[113]
- Exports
of macadamia nuts could increase from $3m to $40m following the reductions in
tariffs.[114]
- There
is the potential increase for winemakers from 4 to 15 per cent of the Korean
market (by volume).[115]
Impact on the manufacturing sector
The KAFTA RIS argues that while KAFTA will ‘increase
competitive pressure for some Australian manufacturers, the elimination of
Korea’s tariffs .... on Australian industrial exports will create opportunities
for Australian manufacturers’.[116]
In hearings for the Joint Standing Committee on Treaties, the Australian
Manufacturing Workers’ Union (AMWU) noted that both Holden and Toyota ‘cited
KAFTA as one of the reasons why they would close manufacturing’.[117]
The AMWU was also concerned at the potential for a
‘cascading impact on the entire automotive supply chain’, if reduced tariffs
lead to greater imports, and potentially early closure by domestic producers.[118]
While the RIS noted the removal of tariffs on some manufactured exports to
Korea (including engines and gearboxes, for which Korea is a major export
destination), the AMWU expected that after the major automotive manufacturers
ceased operations, Australia would no longer manufacture engines and gearboxes.[119]
Rules of origin and complexity with multiple FTAs
As discussed below in relation to the main provisions of the
Customs Bill, in order to access preferential tariff rates under KAFTA,
exporters must comply with the rules of origin. However, these rules can be
quite complex, and different FTAs may have different rules of origin, creating additional
challenges for exporters who must comply with multiple frameworks. This
complexity means that businesses may make limited use of concessions available
under FTAs, and to some extent the complexity of rules of origin may act as
non-tariff barriers to trade.[120]
A 2013 survey by the Australian Chamber of Commerce and Industry suggests that
many Australian exporters may not understand FTAs or how to access their
benefits, which matches previous research on the topic.[121]
Investment
Under the Foreign Investment Review Board (FIRB) framework,
acquiring an interest worth more than AUD$248 million in an Australian
business must be notified to the FIRB; particular rules and thresholds apply
for some sectors and asset types.[122]
New Zealand and United States investors can invest up to a higher threshold
($1,078m) without a requirement to notify the FIRB.[123]
Under KAFTA, Korean investors will receive similar treatment
to New Zealand and US investors, and be able to acquire an interest worth
$1,078m without a requirement to notify the FIRB (some exceptions remain in
relation to particular sectors and asset types).[124]
Movement of natural persons
provisions
Chapter 10 of KAFTA relates to commitments on the movement
of natural persons. Under that chapter, Australia has made a commitment not to
apply labour market testing, while Korea retained the right to apply labour market
testing for contractual service suppliers.[125]
A DFAT official commented that this was ‘part of a negotiated outcome of the
overall chapter’.[126]
While the relationship between FTA clauses and Australia’s
administrative visa categories is not entirely transparent, the Construction,
Forestry, Mining and Electrical Union has argued that there is an imbalance in
the commitments, and that potentially the FTA will see Korean nationals
entirely exempt from any labour market testing requirements.[127]
Services
Chapter 7 of KAFTA includes a number of commitments in
relation to cross-border trade in services.[128]
This will enable Australian providers of a range of services (including legal,
accounting, and adult education services) to better access the Korean market.[129]
This includes enabling:
- Australian
legal and accounting firms to establish representative offices, and provide
some advisory services
- Australian
adult education service providers to establish certain types of institutions in
Korea, and
- lifting
some restrictions on ownership of certain telecommunications entities.[130]
For financial services, Korea’s commitments in KAFTA
include ‘binding current regulatory arrangements locking in existing access for
Australian service providers’.[131]
The modelling commissioned by the Department of the Foreign
Affairs and Trade hypothesised that trade services liberalisation could double
the growth rate of services exports to Korea, but did not include services in
the main modelling exercise.[132]
Investor State Dispute Settlement
Scheme
In the chapter on investment, KAFTA includes a section
allowing investors of one country to submit a claim against the other country to
arbitration, under an investor-state dispute settlement (ISDS) process.[133]
The inclusion of an ISDS provision in KAFTA is contentious, and has received
significant attention. A committee inquiry into a Bill that would prevent the
Commonwealth from entering into agreements that include ISDS received over
11,000 emails submitted via a GetUp! tool.[134]
More detailed discussion of the ISDS provisions of KAFTA, and some of the
issues associated, are included in Appendix A to this Digest.
Intellectual property commitments
KAFTA includes a number of commitments on intellectual
property protections. Broadly speaking, commitments in KAFTA reflect
Australia’s current IP laws.[135]
While incorporating existing standards into the agreement does not introduce
new commitments, locking-in Australia’s current systems has been criticised by
a number of commentators, as it does not allow flexibility to make regulatory
changes in response to new developments.[136]
For a more detailed discussion, see the Appendix B to this Digest.
Environment and labour commitments
in KAFTA
KAFTA includes chapters on labour and the environment
(chapters 17 and 18, respectively). The commitments under KAFTA’s chapter on
the environment are, however, specifically excluded from the dispute settlement
mechanism between the two countries, leaving them effectively as domestic
policies.[137]
Similarly, the commitments under the labour chapter are excluded from the
dispute settlement mechanism between the two countries.[138]
Chapter 3 of KAFTA deals with the Rules of Origin (ROO),
setting out the procedures and documentation required to show that a good
qualifies for preferential tariff rate under KAFTA. The provisions of the
Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill
2014 (Customs Bill) amend the Customs Act 1901 to implement these rules.[139]
ROO are used to determine where a product or good has been
made, or its country of origin, for tariff purposes. The significance of a
determination about the country of origin of a product lies in the fact that
only products which have been produced in a country which is party to the
relevant FTA can be given the preferential tariff rates of, and thus improved
access to, the Australian market under that FTA.
A central part of FTAs is access to preferential tariff
rates; however, the benefit of a reduction in these rates is not automatic or
guaranteed. Being able to take advantage of the zero tariff rate will depend
on the particular ROOs and their restrictiveness for the goods being imported.
An FTA ‘only confers preferential terms for market access and tariff concession
to those goods, services and investments that comply with the terms and
conditions of the agreement’.[140]
As discussed above (Rules of origin and complexity
with multiple FTAs), the complexity involved with distinct ROO under multiple
FTAs can create cumulative complexity for business, and potentially reduce the
extent to which FTAs are utilised.
Schedule 1, Part 1—Korean
originating goods
Part 1 of Schedule 1 inserts a new Division 1J
into Part VIII of the Customs Act, which ‘sets out the rules for
determining whether goods are Korean originating goods and therefore eligible
for a preferential rate of customs duty under the Customs Tariff Act’.[141]
In simple terms, a good will meet the requirement of being
an ‘originating good’ under KAFTA if one of the following requirements
is satisfied:
- it
is wholly obtained or produced entirely in Korea
- it
is produced entirely in either or both Korea and Australia, from materials that
conform to the provisions of the Rules of Origin (ROO) Chapter of KAFTA, or
- the
product is manufactured in either or both Korea and Australia using inputs from
other countries, and meets the Product Specific Rules (Annex 3A KAFTA) and
requirements specified in the ROO Chapter.
Rule 1—goods wholly obtained in Korea
or in Korea and Australia (proposed Subdivision B)
Proposed subsection 153ZMC(1) stipulates that goods
are Korean ‘originating goods’ if they are ‘wholly obtained’ in
Korea or in Korea and Australia and either:
- the
importer of the goods has, at the time for working out the rate of import duty
on the goods, a Certificate of Origin, or a copy of one, for the goods, or
- Australia
has waived the requirement for a Certificate 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.
It is notable that KAFTA enables Australian and Korean
exporters and manufacturers to self-certify the origin of the goods through
completing a COO. The Australian Chamber of Commerce and Industry (ACCI) has
raised concerns about the self-certification for the COO, pointing out that the
COO:
... should be certified by a third party, according to
internationally accepted standards and in the interests of retaining trust in
the trading system for all stakeholders. A exporter declaration without
Certification and without the same supporting systems is properly a
‘Declaration of Origin’, and should be titled accordingly.[142]
Proposed subsection 153ZMC(2) provides an
exhaustive list of circumstances according to which a good is classified as wholly
obtained in Korea or in Korea and Australia. The list mirrors the
definition of ‘wholly obtained goods’ set forth in Article 3.2
of the KAFTA and includes, for example:
- vegetable
goods grown and harvested, picked or gathered in the territory of one or both
of the Parties
- live
animals born and raised in the territory of one or both of the Parties
- fish,
shellfish and other marine life taken from the sea, seabed, ocean floor or
subsoil outside the territorial seas of Korea by a vessel registered or
recorded in Korea and entitled to fly its flag
- waste
and scrap derived from:
-
production
in the territory of Korea, or
-
used
goods collected in the territory of Korea provided that such goods are fit only
for the recovery of raw materials
-
goods
collected from the territory of Korea which can no longer perform their
original purpose and are fit only for the recovery of raw materials.
Rule 2—Goods produced entirely in
Korea or in Korea and Australia from ‘originating materials’ (proposed
Subdivision C)
Proposed section 153ZMD provides that goods are
considered to be of Korean origin (Korean originating goods) if they were
produced entirely in Korea or in Korea and Australia, using exclusively ‘originating
materials’ and either:
- the
importer of the goods has, at the time for working out the rate of import duty
on the goods, a Certificate of Origin, or a copy of one, for the goods, or
- Australia
has waived the requirement for a Certificate of Origin for the goods.
The term ‘originating material’ is defined in proposed
section 153ZMB to mean Korean or Australian originating goods that are used
in the production of other goods, or indirect materials.
Rule 3—Goods produced entirely in
Korea or in Korea and Australia from ‘non-originating materials’ (proposed
Subdivision D)
Proposed subsection 153ZME(1) sets out the requirements
according to which a good which was produced entirely in Korea, or in Korea and
Australia, from non-originating material, may qualify as a Korean originating
good. These requirements are:
- they
are classified to a heading or subheading of the Harmonized Commodity
Description and Coding System (also referred to Harmonized System or simply
‘HS’) that is established by or under KAFTA[143]
and will be specified in column 1 of the table in Schedule 1 to the Customs
(Korean Rules of Origin) Regulations 2014 (the Korean Regulations)
- they
are produced entirely in the territory of Korea, or entirely in the territory
of Korea and the territory of Australia, from non-originating materials only or
from non-originating materials and originating materials
- each
requirement that is specified in the regulations to apply in relation to the
goods is satisfied, and
- either
-
the
importer of the goods has, at the time for working out the rate of import duty
of the goods, a Certificate of Origin, or a copy of one, for the goods, or
-
Australia
has waived the requirement for a Certificate of Origin for the goods.
Change in tariff classification
For goods that contain inputs/materials obtained outside
Korea or Australia (but are used in the production of goods in either Korea or
Australia), a change of tariff classification (CTC) approach has been adopted. This
means that a good qualifies as an originating good if a transformation takes
place, defined in terms of a change in the tariff code of the input to the
tariff code of the final product (for example, transforming steel into kitchen
products).[144]
The Schedule of Product Specific Rules sets out the specific CTC requirements
(Annex 3A KAFTA).
Proposed subsections 153ZME(2) and 153ZME(3)
respectively provide that the regulations may prescribe that each
non-originating material used in the production of the goods is required to
satisfy a prescribed change in tariff classification, and the circumstances
which need to be satisfied in order to achieve that change in tariff
classification.
Proposed subsection 153ZME(4) provides that the
change in tariff classification is taken to be satisfied if the total value of
all of the non-originating materials used in the production of the goods does
not exceed ten per cent of the customs value of the goods.[145]
The Explanatory Memorandum states that the value of
non-originating materials for the purposes of proposed subsection 153ZME(4)
is to be worked out in accordance with the method that will be included in the
Korean Regulations.[146]
Proposed subsection 153ZME(5) states that proposed
subsection 153ZME(4) does not apply to goods that are classified to a
headings or subheadings in the HS as follows:
- headings
0301 to 0303 or 0305 to 0308 of Chapter 3 (specified Fish and Crustaceans,
Molluscs and Other Aquatic Invertebrates)
- headings
0701 to subheading 0710.10 or heading 0713 to 0714 of Chapter 7 (specified
Edible Vegetables and Certain Roots and Tubers. For example, potatoes fresh or
chilled, tomatoes fresh or chilled, onions and shallots)
- headings
0801 to 0810 or subheadings 0813.10 to 0813.40 of Chapter 8 (specified Edible
Fruit and Nuts; Peel of Citrus Fruit or Melons).
Regional value content
A regional value content (RVC) is a type of rule of origin.
For some goods, a RVC approach has been specified. Under a RVC approach,
originating materials and domestic processes must represent a specified
proportion of the final value of the product. The RVC component represents an
additional requirement to the specified CTC.
Proposed subsection 153ZME(7) provides that
regulations may prescribe that goods must have a RVC of a minimum prescribed
percentage. Proposed subsection 153ZMF(2) provides that if goods are required
to have a RVC of at least a particular percentage, the regulations must require
the value of the packaging material or container to be taken into account as
originating materials or non-originating materials, as the case may be, for the
purposes of working out the RVC of the goods. The value of the packaging
material or container is to be worked out in accordance with the regulations (proposed
subsection 153ZMB(3)).
Rule 4—Non-qualifying operations
(proposed Subdivision E)
Proposed subsection 153ZMG(1) provides that if any
of the following processes or operations are the only operations or processes that
take place in Korea, or in Korea and Australia, in relation to goods (either
alone or as a combination), this does not make those goods ‘originating goods’:
- operations
to preserve goods in good condition for the purpose of transport or storage of
the goods
- changing
of packaging or the breaking up or assembly of packages
- washing,
cleaning or removal of dust, oxide, oil, paint or other coverings
- sharpening
or simple processes of grinding, crushing or cutting;
- simple
placing in bottles, cans, flasks, bags, cases or boxes, fixing on cards or
boards or other simple packaging operations
- affixing
or printing marks, labels, logos or other distinguishing signs on goods or on
their packaging
- disassembly
of goods
- the
reclassification of goods without any physical change in the goods, and
- any
combination of operations referred to above.
Outward processing zones on the
Korean Peninsula (OP)
Proposed subsection 153ZMI enables goods that have
been exported from Korea and have undergone processing in an area designated as
an outward processing (OP) zone (under Annex 3-B of KAFTA) and then re‑imported
into Korea, to be treated as Korean originating goods under Division 1J. OP
refers to the temporary exportation of goods for (additional) processing. The
Kaesong Industrial Complex (KIC) located in North Korea is an outward
processing zone where South Korean companies have been allowed to establish
manufacturing plants and employ North Korean labour.[147]
Korean goods are temporarily sent to KIC in North Korea for processing and then
the finished goods are imported back to South Korea for domestic consumption, export
or further processing in Korea.
Korea does not impose any tariff on North Korean products
because the Korean government treats inter-Korean trade as trade within one
customs territory. This treatment of the two Koreas as one does not derive from
any FTA between the two Koreas. Rather, it arises out of Article 12 of the Inter-Korean
Exchange and Cooperation Act (IKECA) (South Korean legislation) which
provides that ‘inter-Korean trade is internal trade within a nation and,
therefore, shall not be regarded as trade between countries’. Professor Ahn
points out that the same provision was inserted into:
... a special implementation law for WTO Agreements in 1995 and
declared that it would treat North Korean products as domestic goods. Article 5
of the South Korean “Special Law on Implementation of World Trade Organization
Agreement” [Marrakesh Agreement], subtitled “Intra-Nation Transaction”,
provides that “the trade between South and North Koreas constitutes an internal
trading within an economy and as such shall not be regarded as that between
countries”[148]
However, other countries do not consider the two Koreas to
be one customs territory.[149]
Accordingly, they treat products that have been processed in the KIC as North
Korean goods. Because North Korea is not a member of the WTO and thus does not
enjoy the benefit of Most Favoured Nation rates of duty, it means that Koreans
who process their goods in OP (KIC) in North Korea get unfavourable treatment
for their North Korean originating goods. As a way around this problem, Korea has
entered into a number of FTAs which have been drafted to include OP zone
provisions[150]
that enable the products manufactured or processed in an OP zone to also enjoy preferential
tariff rates. In practical terms this means that Korean FTAs extend preferential
customs tariff rates to the KIC products that are arguably of North Korean
origin. It is notable that this same beneficial treatment is not always
extended to goods undergoing OP in other countries.
The Korea-Singapore FTA was one of the first FTAs
to include an OP zone provision. Interestingly, it appears to have been drafted
much more tightly than the OP zone clause in KAFTA.[151]
Trade Law Professor Ahn points out that:
Although the above approach to treat products from North
Korean territories was accepted by Singapore and EU‑FTA, other FTA
negotiation partners such as Japan and the United States have vehemently
opposed to the adoption of similar provisions. In fact, the Korea-US FTA came
up with the different approach to leave the important decision in the future,
widening the potential to cover the whole peninsula but with much more
difficult conditionality. Annex 22-B of the Korea-US FTA stipulates “Committee
on Outward Processing Zones on the Korean Peninsula” to address the issues for
products manufactured from North Korean territories as follows:
3. The Committee shall identify
geographic areas that may be designated outward processing zones. The Committee
shall establish criteria that must be met before goods from any outward
processing zone may be considered originating goods for the purposes of this
Agreement, including but not limited to: progress toward the denuclearization
of the Korean Peninsula; the impact of the outward processing zones on
intra-Korean relations; and the environmental standards, labor standards and
practices, wage practices and business and management practices prevailing in
the outward processing zone, with due reference to the situation prevailing
elsewhere in the local economy and the relevant international norms.
4. The Committee shall determine
whether any such outward processing zone has met the criteria established by
the Committee. The Committee shall also establish a maximum threshold for the
value of the total input of the originating final good that may be added within
the geographic area of the outward processing zone.
5. Decisions reached by the
unified consent of the Committee shall be recommended to the Parties, which
shall be responsible for seeking legislative approval for any amendments to the
Agreement with respect to outward processing zones.[152]
Professsor Ahn goes on to point out that:
The Korea-EU FTA was a crucial opportunity for Korea to
reverse the above compromise with the US back to the original approach to more
broadly embrace products from KIC. However, the above provision, albeit with
much weaker conditions, was adopted similarly in the Korea-EU FTA.[153]
As in the case of the Korea-US FTA, Annex
3-B of KAFTA also establishes a Committee on Outward Processing Zones on
the Korean Peninsula. However, it is notable that unlike the Korea-US FTA, Annex
3-B of KAFTA is less detailed simply providing that:
The Committee shall review the conditions on the Korean
Peninsula and identify geographic areas that may be designated as outward
processing zones. The Committee shall also establish a maximum threshold for
the value of the total input of the originating final good that may be added
within the geographic area of the outward processing zone.[154]
OP (KIC) and
human rights Issues
ACTU President Ged Kearney has raised concerns that KAFTA
‘leaves the door open to imports from parts of North Korea that are not subject
to labour standards and which are notorious for forced and prison labour’.[155]
Chapter 17 of KAFTA deals with labour issues. However, the drafting of labour
standards in that chapter are arguably expressed as rather weak commitments.
Furthermore, they reflect minimum standards[156]
and do not appear to be enforceable through the government-to-government
dispute process that would be applicable to other parts of KAFTA.[157]
Schedule 1, Part 2—Verification
powers
Under KAFTA, Australia and Korea are required to create
and confer certain verification powers.[158]
In this regard, proposed Division 4G of Part VI of the Customs Act
is titled ‘Exportation of goods to Korea’ and will impose obligations on
people who export goods to Korea and who wish to obtain preferential treatment
in respect of those goods in Korea, and on people who produce such goods.
Record keeping obligations
The Customs Act already contains record keeping
requirements for exporters. However, these are not sufficient to comply with
the requirements set out in KAFTA. Proposed section 126AMB provides that
regulations may prescribe record keeping obligations in relation to goods that
are exported to Korea and are claimed to be Australian originating goods and
are seeking preferential tariff treatment in Korea. These regulations may
impose obligations on an exporter or producer of goods.
Power to require records
Proposed section 126AMC provides that an authorised
officer may require a person who is subject to record keeping obligations under
the proposed 126AMB regulations to provide to the officer records which
the officer requires.
Power to ask questions
Proposed section 126AMD provides that an authorised
officer may require a person who is an exporter or producer of goods that are
being exported to Korea and for which preferential tariff treatment is sought,
to answer questions in order to verify the origin of the goods.
Schedule 1, Part 3—Application
provisions
Part 3 of Schedule 1 specifies the application
of the rules relating to Korean originating goods, and the new verification
powers. Specifically:
- the
provisions relating to Korean originating goods apply to goods imported after
the date of commencement, or goods imported before the date of commencement but
where the relevant period for working out the tariff rate is after
commencement, and
- the
new verification powers apply to goods exported to Korea on or after
commencement (regardless of when the goods were produced).
The Customs Tariff Amendment (Korea-Australia Free Trade
Agreement Implementation) Bill 2014 (the Tariff Bill) amends the Customs
Tariff Act 1995 to create a new set of tariff rates, which are applied to
Korean originating goods.[159]
The Bill does this through:
- a
number of technical amendments to the Customs Tariff Act 1995 (Tariff
Act), made by items 1 to 25 and items 27 to 31 and
- inserting
a proposed Schedule 10 (item 26 of the Bill) into the Tariff
Act. This new schedule sets the tariff rates that will apply for goods
which are Korean originating (as discussed under the rules of origin, outlined
above).
The Tariff Act refers to ‘duties of Customs’
(section 15); this is the ‘tariff’, or a tax on imports applied according to
the relevant schedule (section 16). Schedule 3 of the Tariff Act specifies
the general tariff rates, which apply to goods unless they are eligible for
concessional rates under an FTA, which is specified in the relevant schedule (proposed
Schedule 10 will specify rates under the KAFTA). Tariff rates are set
out for goods according to 8 digit codes under the Harmonized Commodity
Description and Coding System (Tariff Act subsection 7(3)).
Tariff rates under proposed Schedule 10 are
drafted in line with passage and treaty ratification in 2014. If there were a
delay in treaty ratification so that the treaty did not enter into force in 2014,
then the Bill as drafted would result in tariff reductions beyond those agreed
under KAFTA (because the rates agreed to for the second year after entry into
force are drafted as applying from 2015).
The tariff rates set out in proposed Schedule 10
cover an extremely wide range of goods, under almost 700 tariff lines. To the
extent possible, the discussion above (Tariff
reductions) summarises the key concessions made by Australia and the
Republic of Korea, and the expected impacts on trade.
Background – what is ISDS?
The ISDS clause in KAFTA enables an investor of one party to
bring an arbitration claim against the other party.[160]
Instead, the agreement specifies that six months after giving notice of a
claim, the dispute may be heard under the Convention for the Settlement of
Investment Disputes between States and Nationals of Other States (‘the ICSID
Convention’), or the rules of the United Nation Commission on International
Trade Law (‘UNCITRAL arbitration rules’).[161]
Rationale for inclusion of ISDS
provisions
The Minister’s Statement on the KAFTA and the materials from
the Department of Foreign Affairs and Trade do not include extensive discussion
of the rationale for including an ISDS in the KAFTA.[162]
The Regulatory Impact Statement notes that the inclusion of an ISDS ‘will
promote investor confidence by providing for international arbitration of
FTA-based investment disputes.’[163]
More broadly, in its report on bilateral and regional trade
agreements, the Productivity Commission (‘the PC’) considered the rationale for
including ISDS provisions in trade agreements, and identified two key
arguments:
1. Governments may have an incentive to offer favourable
conditions to foreign investors in the period prior to them making an
investment, and then to expropriate that investment after it has been made.
2. Foreign businesses might face systemic biases against
them, such as when tendering for government procurement contracts, or might
face more onerous requirements in meeting regulatory or planning approvals.[164]
In its analysis of the evidence, however, the PC noted
earlier findings that the inclusion of ISDS clauses does not increase
investment flows, and concluded:
There does not appear to be an underlying economic problem
that necessitates the inclusion of ISDS provisions within agreements. Available
evidence does not suggest that ISDS provisions have a significant impact on
investment flows.[165]
While the negotiating process for trade agreements is
confidential, media reporting and comments by officials suggest that Korea
would not have accepted an FTA that did not include ISDS – a deputy secretary
from the Department of Foreign Affairs and Trade commented that ‘the inclusion
of an ISDS mechanism was essential to Korea’, and agreed that without the ISDS
included, ‘the agreement would never have been signed’.[166]
A representative from the meat and livestock industry commented that when it
became apparent that the inclusion of ISDS was potentially a stumbling block,
they ‘actively lobbied’ on the issue.[167]
In providing evidence to a Senate committee, Professor Luke
Nottage also argued that to reject ISDS would be an overly strong response,
turning away from the international legal system:
... rejecting completely ISDS ... would make Australia unique
among developed countries and put us in the company of a very few countries,
even among developing countries, mainly a few very Leftists regimes in South
America. I think it would torpedo future trade and investment treaty
negotiations to which the major parties in Australia have long been committed,
as well as potentially inhibit the development of multilateral initiatives and
international investment law. I think it would also reinforce a sense I have,
shared among public international law colleagues in Australia, that Australia
is turning very inward looking. I think that is obvious, for example, in the
field of international human rights, unfortunately ...[168]
Critiques of ISDS
A number of academics and other commentators have expressed
significant concerns with the inclusion of ISDS provisions in trade agreements,
and in particular with a broader international trend towards greater use of
ISDS provisions.
A number of critiques centre on the nature of the ISDS
system. As Chief Justice French commented recently, ‘Arbitral tribunals set up
under ISDS provisions are not courts. Nor are they required to act like courts
... Questions have been raised about the consistency, openness and impartiality
of decisions made in ISDS arbitrations.’[169]
The shortcomings of the ISDS system include:
- inconsistency
– because there is no binding precedent, some panels have made different
findings on the same set of facts[170]
- high
costs – disputes under ISDS systems are often extremely expensive to pursue.
Because the arbitration panellists are paid in proportion to time spent on a
case, they have a direct incentive to extend the length of the dispute process
- conflicts
of interest – panellists in one case may act as the legal representative for a
claimant or respondent in another, creating a situation with potential for
strong conflicts of interest, and
- lack
of transparency – while more recent agreements tend to include requirements
that all proceedings and documents be published, in some cases proceedings are
not publicly available, or even restricted.[171]
In turn, these aspects of the ISDS system have
implications for governments, and their ability to regulate in the public
interest. Discussing the complexity of ISDS provisions, Chief Justice French
noted that ‘the significance of ISDS arbitral processes is global. They have
general implications for national sovereignty, democratic governance and the
rule of law within domestic legal systems’.[172]
The first impact on governments is the cost associated
with defending ISDS cases. While in many cases information is unavailable or
uncertain, an OECD survey estimated that the costs of simply defending a case
average around USD $8m, and in some cases exceed USD $30m.[173]
More importantly, panels may have significant discretion in awarding damages;
in one extreme case Ecuador was required to pay USD $1.8 billion.[174]
The nature of the ISDS system, and the significant costs
associated with it, can in turn have a significant impact on government
decisions. One potential risk is that the threat of action under an ISDS provision
will prevent government from introducing new regulations – ‘regulatory chill’.
While one statistical analysis found conflicting evidence on regulatory chill,
Dr Tienhaara notes that assessing the level of regulatory chill is difficult,
as it requires finding ‘evidence of something that hasn’t happened’
(emphasis original).[175]
Despite this challenge, a number of sources cite evidence – both anecdotally,
and of particular reforms – which have been abandoned at the threat of an ISDS
case (particularly in Canada, under the North America Free Trade Agreement).[176]
In its analysis of the risks associated with ISDSs, the
Productivity Commission concluded:
In the Commission’s assessment, ISDS provisions can impose a
range of potential problems on sovereign countries, the nature and extent of
which are very difficult to calculate and may not be known at the time an
agreement is made ... Experience in other countries demonstrates that there are
considerable policy and financial risks arising from ISDS provisions.[177]
Most favoured nation clauses
The most-favoured nation (MFN) clause is a linchpin in
investment agreements (and material on investment in FTAs). As outlined in a
report by UNCTAD:
It means that a host country treats investors from one
foreign country no less favourably than investors from any other foreign
country. The most-favoured-nation standard gives investors a guarantee against
certain forms of discrimination by host countries, and it is crucial for the
establishment of equality of competitive opportunities between investors from
different foreign countries ... While most-favoured-nation treatment is generally
more than the minimum standard required under customary international law, it does
not go so far as to put the foreign investor on an equal footing with domestic
investors in the host country.[178]
However, depending on the drafting of the ISDS provision and
other terms in an FTA, MFN clauses have in some cases been used to access
provisions in other treaties that are more favourable to their case.
In addition to the MFN provision at Article 11.4, KAFTA also
includes a standard clause providing for ‘fair and equitable treatment’ (FET; Article
11.5). However this clause has been interpreted quite broadly in previous ISDS
cases, and in some cases raised concerns – an UNCTAD review noted ‘the
application of FET provisions has brought to light the need to balance
investment protection with competing policy objectives of the host State, and
in particular, with its right to regulate in the public interest’.[179]
More broadly, ISDS provisions can in some cases provide
preferential treatment to foreign investors over domestic investors, who are
not able to access the protections provided under an FTA.[180]
Investors have, in some cases, been able to selectively draw on clauses from
other treaties that are more favourable to their case.
Protections included in KAFTA
In his speech on the KAFTA, the Minister for Trade noted
that in relation to ISDS, the ‘government has ensured inclusion of appropriate
carve-outs and safeguards in important areas such as public health and
environmental measures’.[181]
There are a number of protections included in the KAFTA:
-
decisions in relation to foreign investment policy are excluded
from ISDS claims[182]
-
general exceptions are provided in Chapter 22, to exempt measures
‘necessary to protect human, animal or plant life or health’, and a number of
other categories[183]
- the
effectiveness of this broad clause is uncertain – there is currently an ongoing
arbitration on environmental issues brought under the North American Free Trade
Agreement (NAFTA), despite NAFTA including a similar exception for measures to
protect ‘human, animal or plant life or health’.[184]
A US non‑profit organisation estimates that in a different legal system
(the World Trade Organisation’s trade dispute settlement process, distinct from
ISDS), the exemption has only been successfully used in one of forty cases[185]
-
a clause that specifically mentions ‘legitimate public welfare
objectives, such as public health, safety, and the environment’ excludes
actions taken to protect these interests from grounds an investor can use to
bring a claim, and[186]
-
a number of more technical drafting steps have been used to restrict
the extent to which the ISDS clause can be used, and improve its transparency.[187]
Exactly how these changes will apply, and the extent to
which they will provide a significantly improved safeguard is uncertain. One official
suggested that the safeguards were stronger than most of Australia’s existing
agreements:
CHAIR: You said that we have 28 agreements that have ISDS
provisions in them. Would the protections in this agreement be as great or
greater than in those 28 other agreements?
Mr Braddock [Director, Office of Trade Negotiations,
Department of Foreign Affairs and Trade]: They are as great as any Australia's
existing agreements. There are significantly more explicit safeguards for
legitimate public welfare regulation than in the vast majority of Australia's
agreements. In fact, compared to other agreements worldwide, KAFTA is amongst
the most protective of treaties in terms of its safeguards for legitimate
government regulation.[188]
However, academic commentators have been critical. Dr Kyla
Tienhaara wrote in her submission that:
It may be several years before these cases [current ISDS
cases which involve similar safeguard clauses] are decided. But even if the
tribunals rule in the respective governments’ favour, this will not guarantee
that the ‘safeguards’ will work for Australia as awards rendered in ISDS are
only binding on the parties involved in the dispute and future tribunals may
interpret the clauses differently.[189]
Another academic commented that public health exceptions
‘... make harder the case to win [sic] but they do not preclude it from being
brought.’[190]
More definitively, Dr Matthew Rimmer wrote:
Investment clauses in the Korea-Australia Free Trade
Agreement 2014 could be used and abused by Big Tobacco. The World Health
Organization and tobacco control advocates have warned that Big Tobacco has
sought to use investment clauses to challenge tobacco control measures, such as
graphic health warnings and plain packaging of tobacco products, and frustrate
the implementation of the World Health Organization Framework Convention on
Tobacco Control.[191]
More broadly, the safeguard clauses do not address
concerns in relation to the underlying shortcomings in the ISDS system.
The Trade and Foreign Investment
(Protecting the Public Interest) Bill 2014
The Senate Foreign Affairs, Defence and Trade Legislation Committee
recently concluded an inquiry into a private member’s Bill, which would have
prevented Australia from entering into FTAs with ISDS provisions. The Committee
process included public hearings and a large number of submissions. The Committee
recommended that the Bill not be passed, although the Australian Greens wrote a
dissenting report.[192]
Broadly speaking, commitments in KAFTA reflect Australia’s
current IP laws.[193]
While incorporating existing standards into the agreement does not introduce
new commitments, locking-in Australia’s current systems has been criticised by
a number of commentators, as it does not allow flexibility to make regulatory
changes in response to new developments.[194]
In addition to commitments which match Australia’s existing
framework, Professor Kimberlee Weatherall, an academic at the University of
Sydney, outlined a number of commitments under KAFTA which would be an
extension beyond Australia’s current commitments.[195]
These include:
- a
commitment to ‘provide measures to curtail repeated copyright and related right
infringement on the Internet’[196]
- the
presumption of validity for patents and trademarks,[197]
and
- a
prohibition of recording movies in a public exhibition facility.[198]
The IP material in the agreement has also been criticised
as focussing too heavily on the rights of copyright holders, and not enough on
the public interest.[199]
Amendments to the Copyright Act
1968
While not included in any of the Bills currently
introduced, the National Interest Analysis tabled on the KAFTA stated that:
Consistent with Australia’s existing obligations in the
Australia-US and Australia-Singapore FTAs, and to fully implement its
obligations under KAFTA, the Copyright Act 1968 will require amendment
in due course to provide a legal incentive for online service providers to
cooperate with copyright owners in preventing infringement due to the High
Court’s decision in Roadshow Films Pty Ltd v iiNet Ltd, which found that
ISPs are not liable for authorising the infringements of subscribers.[200]
While this change is not included in the current Bills, a
discussion paper on the issue has been released.[201]
The question of whether changes were in fact required was contentious, with some
academics asserting that the High Court decision did not contravene any of
Australia’s FTA commitments (either under KAFTA or other agreements). Dr
Matthew Rimmer wrote that there ‘is no pretext for overturning the ruling of
the High Court of Australia under the guise of international law’.[202]
Interaction with the ISDS clause
KAFTA explicitly excludes IP claims from the ISDS mechanism.[203]
However, at least one commentator was concerned that the wording could lead to
unintended risks, and potentially make changes to IP law more open to ISDS
claims.[204]
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. Customs Act 1901 (Cth); Customs Tariff Act 1995
(Cth), accessed
29 September 2014.
[2]. Schedule
4 to the Customs
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objectives, including industry assistance and the implementation of tariff
concessions arising from international treaties.
[3]. Significantly,
chapter 3
of KAFTA also sets out the methods by which exporters are to claim their
tariff concession from foreign Customs.
[4]. M
Zanker, presentation to the Department of Foreign Affairs and Trade Treaties
in the Global Environment seminar, 17 November 2004, quoted in J Cavenagh
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[5]. Joint
Standing Committee on Treaties, Review
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and Regional Trade Agreements, Canberra, 2010, pp. 287-313.
[6]. For
further detail, see the Productivity Commission’s report, Bilateral
and Regional Trade Agreements (Canberra, 2010, p. 1); or for an
in-depth discussion, see R. Snape, Australian Trade Policy 1965–1997: A
documentary history (Allen and Unwin, St. Leonards, 1998). The General
Agreement on Tariffs and Trade (GATT) came into effect in 1948, and
transitioned to the World Trade Organisation in 1994 (Joint Standing Committee
on Treaties, Report
142: Treaty tabled on 13 May 2014 – Free Trade Agreement between the Government
of Australia and the Government of the Republic of Korea (Seoul, 8 April 2014),
Parliament of Australia, Canberra, p. 3, 4 September 2014).
[7]. World
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[8]. S
Schwab, ‘After
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p. 29.
[9]. Productivity
Commission, Bilateral
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Affairs and Trade (DFAT), ‘Australia’s
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[10]. Productivity
Commission, Bilateral
and Regional Trade Agreements, op. cit., p. 5.
[11]. PB
Butt and D Hamer, eds., LexisNexis Concise Australian Legal Dictionary,
fourth edn., LexisNexis Butterworths, Chatswood, 2011, p. 387.
[12]. Joint
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[13]. Productivity
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[14]. World
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[15]. Department
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[16]. Productivity
Commission, Bilateral
and Regional Trade Agreements, op. cit., p. 255.
[17]. Joint
Standing Committee on Treaties, Report
142: Treaty tabled on 13 May 2014 – Free Trade Agreement between the Government
of Australia and the Government of the Republic of Korea (Seoul, 8 April 2014),
op. cit., p. 8.
[18]. Productivity
Commission, Bilateral
and Regional Trade Agreements, op. cit., p. 208-211.
[19]. Joint
Standing Committee on Treaties, Report
142: Treaty tabled on 13 May 2014 – Free Trade Agreement between the Government
of Australia and the Government of the Republic of Korea (Seoul, 8 April 2014),
op. cit., p. 37.
[20]. Productivity
Commission, Bilateral
and Regional Trade Agreements, op. cit., pp. 292-294.
[21]. Australia-Republic
of Korea Free Trade Agreement Feasibility Study: A joint study by ITS Global
and the Korean Institute for International Economic Policy, 17 April
2008, accessed 24 September 2014, p. 110; Centre for International Economics, Australia-Korea
Free Trade Agreement: Implications for Australia, 28 February 2014, p. 13. The
value in Australian currency of the gains estimated in $USD in the 2008
analysis depend on assumptions about the inflation rate of both currencies;
that study also estimated that Australia’s GDP would be 0.04 per cent higher in
2020.
[22]. Department
of Foreign Affairs and Trade (DFAT), National
Interest Analysis: Free Trade Agreement between the Government of Australia and
the Government of the Republic of Korea, accessed 24 September 2014,
paragraph 5.
[23]. Ibid.,
paragraph 8.
[24]. Productivity
Commission, Bilateral
and Regional Trade Agreements, op. cit., pp. 259-260.
[25]. Productivity
Commission, Bilateral
and Regional Trade Agreements, op. cit., p. 264.
[26].
Senate Standing Committee on Foreign Affairs, Defence and Trade Legislation
Committee, Trade
and Foreign Investment (Protecting the Public Interest) Bill 2014, The
Senate, Canberra, August 2014.
[27]. Joint
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142: Treaty tabled on 13 May 2014 – Free Trade Agreement between the Government
of Australia and the Government of the Republic of Korea (Seoul, 8 April 2014),
op. cit., p. 48.
[28]. K
Thomson and M Parke, Dissenting report, Joint Standing Committee on Treaties, Report
142: Treaty tabled on 13 May 2014 – Free Trade Agreement between the Government
of Australia and the Government of the Republic of Korea (Seoul, 8 April 2014),
op. cit., p. 59.
[29]. Australian
Greens Senator, Dissenting report, Joint Standing Committee on Treaties, Report
142: Treaty tabled on 13 May 2014 – Free Trade Agreement between the Government
of Australia and the Government of the Republic of Korea (Seoul, 8 April 2014),
op. cit., pp. 63-69.
[30]. Ibid,
63-64.
[31]. Ibid.,
p. 64.
[32]. Ibid.,
p. 65.
[33]. Ibid.,
p 66.
[34]. Ibid.,
p. 67-68.
[35]. Senate
Standing Committee on Foreign Affairs, Defence and Trade, Korea-Australia
Free Trade Agreement, The Senate, Canberra, 2014.
[36]. Senate
Legal and Constitutional Affairs Legislation Committee, Customs
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[37]. Ibid.,
p. vii.
[38]. Australian
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[39]. Ibid.
[40]. In
April 2011, the Gillard government announced that it would no longer include
ISDS provisions in free trade agreements. The new trade policy was announced in
response to recommendations of the 2010 review of Bilateral and Regional Trade
Agreements by the Productivity Commission. Department of Foreign Affairs and
Trade, Gillard
Government Trade Policy Statement: Trading our way to more jobs and prosperity,
April 2011, p. 14. For a discussion of the role of including ISDS provisions in
the negotiation process, see R Callick, ‘Korea
ready to talk turkey after FTA hurdle removed’, The Australian, 1
November 2013, p. 18; J Adams (Deputy Secretary, Department of Foreign Affairs
and Trade), Evidence
to Joint Standing Committee on Treaties, Korea-Australia Free Trade
Agreement, 5 August 2013, p. 6, accessed 24 September 2014.
[41]. B
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Labor
backs Korean trade deal to support jobs, media release, 23 September
2014.
[42]. Australian
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142: Treaty tabled on 13 May 2014 – Free Trade Agreement between the Government
of Australia and the Government of the Republic of Korea (Seoul, 8 April 2014),
Parliament of Australia, Canberra, 2014, pp. 63-69.
[43]. Trade
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29 September 2014.
[44]. Senator
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Bill to protect public interest against Trojan horse provisions in trade
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[45]. Senate
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[46]. Ibid.,
p. 17.
[47]. Ibid.
[48]. Ibid.
[49]. Ibid.,
p. 29.
[50]. N
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[51]. J
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[52]. D
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[53]. Almond
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[54]. Cherry
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[55]. Sheepmeat
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Australian Lot Feeders Association, Submission
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13 May 2014–Free Trade Agreement between the Government of Australia and the
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[56]. Meat
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[57]. Australian
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[193]. K
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[194]. Ibid.;
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[196]. ‘Article
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[197]. Ibid.,
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[198]. Ibid.,
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[199]. M
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[200]. Department
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[201]. Australian
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[202]. K
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[203]. Article
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[204]. K
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