This Report contains the results of the Joint Standing Committee on Treaties’ review of two very different free trade agreements, the Comprehensive Economic Partnership Agreement between the Government of Australia and the Government of Indonesia (IA-CEPA), and the Free Trade Agreement between Australia and Hong Kong, China (A-HKFTA) and the Investment Agreement between the Government of Australia and the Government of the Hong Kong Special Administrative Region of the People’s Republic of China ( the Hong Kong Investment Agreement).

Despite the size and proximity of the Indonesian market, trade between Australia and Indonesia is not as substantial as it could be. There are a number of reasons for this, including:

• popular support for protectionist trade policies in Indonesia;
• tariff barriers imposed by Indonesia;
• inconsistencies in the application of Indonesian customs and other rules relating to international trade;
• risks associated with foreign investment in Indonesia; and
• barriers to accessing services markets in Indonesia, including, for example, restrictions in the level of foreign ownership permitted in service sector businesses.

The IA-CEPA is intended to be a tool to improve the trade relationship between Australia and Indonesia by:

• establishing a time frame for the reduction in tariffs imposed by Indonesia;
• facilitating cooperation to address non-tariff barriers to trade;
• easing restrictions on Australian participation in the Indonesian services sector; and
• improving protections for Australian foreign investments in Indonesia.

On the other hand, Australia and Hong Kong have a well established and extensive trade relationship.

Hong Kong’s prosperity is based on international trade. As a consequence, Hong Kong imposes no tariffs on Australian goods, applies only limited non-tariff barriers, and has a liberal and open foreign investment environment.

Consequently, the A-HKFTA for the most part codifies existing trade arrangements, providing certainty for Australian businesses wishing to access the Hong Kong market.

The only significant change is the replacement of the 1993 Australia-Hong Kong Investment Agreement with the modern Hong Kong Investment Agreement.

The new Hong Kong Investment Agreement reflects the evolution of foreign investment policy internationally, particular in relation to Investor-State Dispute Settlement (ISDS). The new ISDS provisions:

• improves protections for governments wishing to regulate in the public interest;
• make ISDS processes transparent; and
• in the event that a foreign investor is successful in an ISDS claim, limits the financial compensation the investor is entitled to.

In the Committee’s view, both the IA-CEPA, and the A-HKFTA and Hong Kong Investment Agreement, are in Australia’s national interest.

The Committee recommends binding treaty action in both cases.