After the Australian election, United States President Barack Obama called newly elected Australian Prime Minister Tony Abbott to congratulate him upon his victory and encourage him to work co-operatively on the regional trade deal the Trans-Pacific Partnership.

Rather than appoint a National Party member, as has been tradition, or Foreign Affairs Minister Julie Bishop, Mr Abbott has selected Andrew Robb to be the Minister for Trade and Investment.  The Prime Minister also emphasised that free trade and foreign investment will be the centrepiece of the Coalition’s agenda to encourage economic growth.

The Coalition’s trade policy is ambitious, hectic, and febrile — covering multilateral, regional and bilateral trade deals. The policy emphasised: “We are committed to the negotiation of a Trans-Pacific Partnership Agreement as a stepping stone to a longer term goal of an Asia-Pacific free trade area.” The Coalition has also been enthusiastic about the Regional Comprehensive Economic Partnership, saying it wants to “fast-track the conclusion of free trade agreements with China, South Korea, Japan, India, the Gulf Cooperation Council and Indonesia”.

1. The democratic deficit

In its trade policy, the Coalition has said it will “take a pragmatic approach to trade negotiations and will consult widely with industry bodies and associations to ensure that stakeholder priorities are taken into account”. However, its approach appears to reflect a decidedly free-market ideology in terms of its beliefs about free trade and foreign investment.

The new government has promised to “provide a greater voice for local industry through the appointment of at least one industry representative who will be directly included in the negotiation of free trade agreements”. Moreover, the Coalition has said that it would establish a ministerial advisory council on trade and investment. The Coalition has promised to appoint “prominent Australian business people as special envoys for Australia’s agricultural, manufacturing and service industries to better promote Australia’s wide range of trade interests in the 21st century”.

Such initiatives are superfluous. DFAT has long been responsive to industry. Indeed, the problem has often been that industry groups have been overly influential in the treaty-making process, with their interests represented above those of the larger public interest.

The Coalition policy does not address the democratic deficits that exist in Australia’s process of treaty-making. There seems to be a failure to address the long-standing problems in relation to the transparency, accountability and public participation in the negotiation of free-trade agreements. The secrecy surrounding regional trade agreements such as the Trans-Pacific Partnership has prevented a full and frank assessment of the benefits and the costs of the trade deals. The Department of Foreign Affairs and Trade has heavily redacted freedom of information requests from concerned citizens. Stakeholder information sessions have lacked substance and content. DFAT has often been unwilling to properly inform the Joint Standing Committee on Treaties about the nature and progress of trade deals. The department has failed to fully and properly engage with other government departments on key matters of public regulation.

The Productivity Commission should be engaged to provide independent analysis of the economic and social impacts of all trade deals, but there has been a lack of willingness to consult with citizens, experts, and civil society over trade agreements. As recommended by Professor George Williams and his collaborators in No Country is an Island, there is a need to overhaul the processes of treaty-making in Australia.

2. Foreign investment

Controversially, the Coalition has said that it remains “open to utilising investor-state dispute settlement clauses as part of Australia’s negotiating position”. Such a stance reflects the influence of the Australian Chamber for Commerce and Industry, with journalist Mike Seccombe commenting that the chamber is “an enthusiastic booster of both the Trans-Pacific Partnership and the inclusion of ISDS provisions in trade agreements”.

This position is highly problematic. As the astute Fairfax economist Peter Martin has commented: “Opening Australian governments to lawsuits over resource extraction, foreign land purchases, pharmaceutical benefits and health measures is a potential minefield for the government.”

Foreign investors have sought to use investor-state dispute settlement clauses to challenge government regulation. Australia’s regime of plain packaging of tobacco products has been challenged by tobacco giant Philip Morris under an investment treaty with Hong Kong. Similarly, Uruguay’s graphic health warnings for tobacco products have been subjected to investor challenges by tobacco companies. Will Abbott’s conservative Coalition defend graphic health warnings and plain packaging in the Trans-Pacific Partnership? Health Minister Peter Dutton has affirmed he would protect plain packaging. However, Bishop and Robb have expressed enthusiasm for state-investor clauses, even though such measures have been used by tobacco companies to challenge Australia’s plain packaging laws.

Investment clauses have also affected other areas of public regulation. Stephen Harper’s Canadian government has faced a challenge over its drug patent laws by big pharmaceutical company Eli Lilly. Quebec’s moratorium on fracking has been challenged under an investor lawsuit under the North America Free Trade Agreement. Ecuador has protested that investor-state clauses have interfered with its ability to gain compensation for pollution by oil companies.

Professor Peter Drahos has observed that trade agreements are “litigation-intensive agreements”. There is a need to account for such long-term costs involved in any negotiation.

3. Trade demands and challenges

There has been a concern that special interest groups will seek sweetheart deals from the Coalition government in free-trade agreements. Rupert Murdoch has been lobbying heavily for enhanced copyright protection to protect his business interests in traditional media forms, such as news, television, and film. Big pharma has been demanding data protection for biologics, stronger patent protection for pharmaceutical drugs, and restrictions on access to essential medicines for HIV/AIDS, tuberculosis, and malaria. The fossil fuel industry has been calling for the removal of environmental and climate regulations — pejoratively known as “green tape” — under the guise of trade agreements and state-investor clauses. The Australian agricultural sector remains rather bitter about the failure to achieve greater gains in the Australia-United States Free Trade Agreement and will be demanding better efforts this time round.

Robb will have to deal with a formidable array of trade partners. The United States overwhelmed Australia in the negotiations over the Australia-United States Free Trade Agreement, and got the better part of the deal; Robb will have to ensure that Australia does not meekly capitulate to the demands of United States negotiators this time round. Japan has been adamant about protecting its traditional agriculture and food sovereignty in the Trans-Pacific Partnership discussions. And Robb’s predecessor, Dr Craig Emerson, doubts whether the tight deadlines for the Trans-Pacific Partnership are realistic.

By entering into preferential trade deals, Australia also is in danger of alienating other countries. The Lowy Institute’s Mike Callaghan has warned that regional deals like the Trans-Pacific Partnership discriminate against poor and emerging countries. China and other members of the BRICS Group are suspicious of regional trade agreements, which exclude them. Robb will need to ensure that Australia builds up — rather than undermines — the multilateral trade regime.

Abbott and Robb will also have to contend with the crossbenches of the Australia Senate to secure the passage of any accompanying legislation for the trade agreements. That will test their powers of negotiation and compromise. It remains to be seen whether the government will realise this ambitious yet perilous dream of free trade, foreign investment and economic growth.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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