Labor to open free trade agreements to scrutiny

All future free trade agreements would be vetted by the Productivity Commission and re-examined every 10 years under a new Labor policy that has won endorsement from business organisations.

Unveiling the policy at a function hosted by the Australian Chamber of Commerce and Industry, Labor trade spokesman Jason Clare said the public was sceptical about the China, Korea and Japan trade agreements in part because they hadn't been subject to an independent arms-length assessment outlining what they would mean for jobs and incomes.

"At the moment, once a free trade agreement is signed a report is prepared by the Department of Foreign Affairs and Trade outlining why it is in Australia's national interest. That's it," he said.

"Given all the scepticism that exists, I don't think it's good enough to rely on a report from the same people who negotiated the deal. It should be independently assessed."

Australia signed the giant 12-nation Trans Pacific Partnership Agreement with the United States without the benefit of any independent analysis of its economic effects. The government published a report commissioned by the Department of Foreign Affairs on the combined economic effects of China, Korea and Japan free trade agreements, but did not allow other parts of government to independently analyse them.

The Productivity Commission has been scathing about the latest series of agreements, arguing that they grant legal rights to foreign investors not available to Australians, expose the government to potentially large unfunded liabilities and impose extra costs on businesses attempting to comply with them.

The Commission says that by favouring some countries over others and excluding firms sourcing substantial inputs from overseas, they "add to the complexity of international trade and investment, are costly and time-consuming to negotiate and add to the compliance costs of firms and administrative costs of governments."

Appearing before a parliamentary inquiry, Commission chairman Peter Harris said without a genuinely independent analysis before deals were signed, the consensus in favour of open trade would crumble.

The analysis should first identify the problem that the trade agreement was designed to solve, find the lowest-cost means of solving that problem and then make clear the costs the proposed agreement would impose on business.

It should be conducted before negotiations begin, and again in the four or so months after they have concluded but before the deal is ratified.

The Korea-Australia agreement included 5200 separate so-called rules of origin delineating which inputs could be included in an export in order for it to have preferential treatment. It was "red tape, growing at a very healthy rate," Mr Harris said.

Mr Clare also promised that the Commission would conduct an independent review of each agreement ten years after ratification. The department told the parliamentary inquiry that to the best of its knowledge none of the agreements signed by Australia had been assessed by Australia after the event. A review of the US-Australia agreement conducted by the Australian National university 10 years after ratification found it had not boosted trade at all.

The Chamber's director of international trade, Bryan Clark said Labor had embraced, not only the Chamber's position but also the recommendations of the parliament's joint standing committee on treaties and the Senate foreign affairs and trade committee. The Business Council said Labor's proposal was "worth considering".

Trade Minister Steven Ciobo said Australia already had measures in place to test the effectiveness of its agreements. There was rigorous oversight by the joint standing committee on treaties, which included Labor politicians.

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This story Labor to open free trade agreements to scrutiny first appeared on The Sydney Morning Herald.