Generating Jobs through Trade and Investment

Labor supports trade and investment between Australia and the rest of the world because this will drive economic growth, create jobs at home and tackle poverty abroad.

Australia has long been a major trading nation. Exports have provided a significant share of our national income and supported large numbers of jobs – from the gold rushes of the colonial era, to the days of riding on the sheep’s back; from the growth of a post-war manufacturing industry to the mining booms of the 2000s.

The jobs of the future will also rely on Australia’s trade performance – from realising the export potential of sophisticated Australian services industries like education, tourism, and financial and professional services, to ensuring our advanced manufacturing firms are able to access the global value chains which are reshaping international production, to supporting our farmers and food processors in supplying high-value Australian food products to the rapidly-growing countries of Asia.

Australia needs to improve its trade performance. As the Australian economy transitions out of the mining boom we need to find alternative sources of growth and jobs. Lifting – and diversifying – our export performance will be an important part of this strategy. That is why a Shorten Labor Government will pursue trade and investment policies which support the jobs and living standards of Australians – by opening up new markets, driving Australian exports into those markets, and attracting new investment into our economy.

Reducing barriers to trade opens up new markets for Australian exports, creates more competitive local industries and benefits consumers through lower prices and more choice. A Shorten Labor Government will negotiate high-quality international trade agreements which reduce tariffs, quotas and “behind the border” barriers to trade while maintaining Australia’s right to adopt sound public policies in areas such as healthcare, environmental protection, fair working conditions and maximising job opportunities for Australian workers. Labor will also adopt policies designed to assist businesses to take advantage of the export opportunities created by international trade agreements, ensuring that the potential benefits are translated into real outcomes.

Tackling Barriers To Australian Exports

Labor will adopt a strategic, export-focused approach to trade by targeting barriers to Australian exports in key overseas markets, reducing red tape for exporters, pursuing multilateral trade liberalisation and facilitating trade in our region.  This will create new trading opportunities which will support and create jobs.

What’s the opportunity?

Exporting provides substantial economic benefits.  It boosts economic growth, especially at a time of subdued domestic demand, by taking advantage of new sources of demand for locally-produced goods and services.  It also improves the efficiency of our economy as local firms improve productivity and increase their scale to compete in new markets.  This not only creates more jobs, it creates better jobs.  Research shows that exporters are more productive and provide better-paid, more secure jobs compared to firms which do not export. ^[1]

Yet Australia is not as trade-intensive as many advanced economies.  McKinsey Australia has pointed out that Australia is one of just three of the world’s 15 largest economies which is not also amongst the world’s top exporting nations.  McKinsey’s Compete to Prosper report says: “Australia’s economy is still a lot more domestically focused than its peers.  It is the 12th largest economy but the 21st largest trader, with about half the trade levels of Germany and South Korea.  Increasing trade – in both goods and services – will be key to unlocking economic growth for the next era.” ^[2]

There are relatively few exporting businesses in Australia.  The Australian Bureau of Statistics estimates that there are 45,306 goods-exporting firms and 2,788 services exporters. ^[3]  That means exporters comprise less than 5 per cent of all Australian businesses.  And many businesses are not considering exporting despite opportunities in our region – PwC’s Passing Us By report shows two-thirds of Australian businesses have no intention of exporting into Asian markets in the near future. ^[4]

Opening up access to new export markets through trade agreements is a critical first step in boosting exports.  But Governments need to do more than tackle the barriers imposed at the borders of our trading partners.  They also need to tackle the barriers faced by would-be exporters at home – such as lack of information and market research, shortages of skills and expertise, market failures in access to finance, lack of contacts in export markets, and the impact of freight costs and red tape in moving goods across borders.

Labor believes there is an important role for Government in helping businesses to increase exports and in helping ordinary Australians to build the skills they need to thrive in a globalised economy.  Our trade policies will be an important part of Labor’s wider plan to drive growth, create the jobs of the future and ensure Australia is a fair and inclusive society.

Our plan for tackling barriers to Australian exports

Labor will seek to boost exports by adopting a strategic, export-focussed approach to trade and export promotion policy with the following measures.

Targetting barriers to exports

Labor will conduct stocktakes of trade barriers faced by Australian exporters, both at home and abroad, to better target trade negotiations and the domestic reform agenda.

The Productivity Commission carries out an annual Trade and Assistance Review which identifies and estimates the costs of Australia’s own trade barriers, such as tariffs on imports.  There is no comparable assessment of the barriers faced by Australian exporters in overseas markets.  Labor will conduct a regular Trade Barriers Analysis to identify barriers to Australian exports, including non-tariff “behind the border” barriers.  These analyses will be modelled on the United States’ National Trade Estimates Report on Foreign Trade Barriers.  The Trade Barriers Analysis will also identify markets where there is significant potential for Australia to expand its exports.  On coming to office Labor will consider whether these stocktakes should be conducted by the Department of Foreign Affairs and Trade or the Productivity Commission. 

Labor will also consider broadening the scope of the Productivity Commission’s Trade and Assistance Review to identify and quantify domestic impediments faced by Australian businesses seeking to export, such as red tape, border administration costs, and market failures in trade finance. 

These stocktakes will feed into a more strategic approach to trade under a Shorten Labor Government, informing trade negotiations, economic diplomacy and trade promotion activities to ensure they better target markets and barriers which matter for our export performance. 

Reducing red tape for exporters

Complex and inconsistent rules of origin in Free Trade Agreements (FTAs) represent significant red tape barriers for would-be exporters.  Labor will tackle red tape by working with Australia’s trading partners to achieve readily-understood and consistent rules of origin for determining whether Australian goods qualify for preferential access to key export markets.

Unlike multilateral trade agreements, bilateral and plurilateral trade agreements contain rules of origin for determining whether products have enough Australian content to qualify for preferential access to export markets.  These rules of origin are not only complex but vary from one agreement to the next. 

Several reports show that many Australian businesses are not utilising market access opportunities available under FTAs. ^[5]  The complexity and costs of complying with rules of origin are reported as one of the factors discouraging businesses from utilising FTAs.  There are no quick fixes to the problem of complex and inconsistent rules of origin.  However, a Labor Government will work with Australia’s trading partners to streamline and harmonise existing rules of origin across trade agreements. 

Streamlining these rules will make them easier for businesses to navigate and use on a day to day basis.  It would mean the same rules would apply regardless of the export market.  This will reduce red tape and costs for Australian businesses seeking to export.  It will make it easier for businesses to take advantage of market access concessions secured in FTAs, encouraging more Australian businesses to export and delivering greater benefits from trade deals.

Facilitating trade in our region

Labor will work with key Asian trading partners to implement trade facilitation reforms which will encourage more trade by reducing costs and improving efficiency.

Trade facilitation involves streamlining customs and border administration procedures.  The World Trade Organisation (WTO) Trade Facilitation Agreement negotiated in 2013 has the potential to significantly reduce trade costs.  But many developing countries need technical assistance and capacity building support to implement these reforms.  As traditional trade barriers like tariffs are falling, other trade costs including the costs of border administration are emerging as significant impediments to trade.  Australia played a key role in finalising the WTO Trade Facilitation Agreement.  Now we need to ensure that the potential benefits of this agreement are realised by helping developing countries to implement the reforms.

A Shorten Labor Government will better target Australia’s “aid for trade” funding towards helping developing economies to implement trade facilitation reforms.  Labor will ensure an appropriate share of aid for trade funding is directed towards trade facilitation.  This funding will be used to provide technical assistance and capacity building through bilateral initiatives and multilateral organisations like the World Bank.

Improving the efficiency and reducing the costs of moving goods across borders has the potential to deliver benefits both to developing countries as they lift their populations out of poverty and to Australia’s economy through expanded exports.  Labor will focus its trade facilitation efforts on key trading partners and potential trading partners in the Asia-Pacific.  Indonesia, for example, is the largest economy in ASEAN, yet is only Australia’s fourth largest trading partner in south-east Asia, after Singapore, Malaysia and Thailand.  Trade facilitation reforms in countries like Indonesia, where there is considerable potential to expand bilateral trade, have the potential to yield lower costs and improved market access for Australian exporters. 

Trade facilitation reforms in regional trading partners would reduce the costs faced by Australian exporters seeking to access those markets.  A more targeted approach towards helping our trading partners to implement the reforms will improve Australia’s standing in the region, improve governance in developing countries, and translate into lower costs and greater market access for Australian firms seeking to do business in these countries. 

Labor will also ensure that aid for trade funding promotes sustainable economic growth, helps reduce poverty and inequality, and supports the development of socially and environmentally-responsible industries in developing economies. 

Supporting multilateral trade liberalisation

Labor will focus on multilateral trade negotiations and work to revive progress on key objectives of the WTO’s Doha Round.

Labor recognises that the greatest potential benefits from trade can be delivered through the WTO and multilateral trade reform.  Bilateral and regional trade agreements can be beneficial but often deliver second or third-best outcomes, not least through the proliferation of red tape and associated costs for exporters.  The Abbott-Turnbull Liberal Government has focused on bilateral trade negotiations at the expense of Australia’s multilateral trade interests.

A Shorten Labor Government will focus on multilateral trade negotiations as the most effective path to trade liberalisation.  Labor will work on the international stage to find new pathways for multilateral trade reform, to strengthen the role of the WTO and to revive progress on key objectives of the Doha Round including freeing up global trade in agriculture and eliminating market-distorting subsidies for farm goods.

Attracting Investment To Create Jobs

Labor will encourage investment and cut red tape for agriculture and agribusiness, key sectors where Australia needs to attract investment if it is to boost exports and create the jobs of the future.

What’s the opportunity?

Australia has tremendous natural resources, a skilled workforce, a diverse society, and a democratic legal and political system.  These endowments mean there are substantial investment opportunities in Australia.  Yet the funds needed to realise these investment opportunities have always exceeded our domestic savings.  That is why growing Australia’s economy has always required topping up domestic savings with foreign investment. 

Over the last four decades, the gap between Australia’s national savings and investment has averaged around 4 per cent of GDP.  This shortfall has been made up by foreign investment.  Foreign investment allows us to invest more than we could by relying on domestic savings alone.  It means we are using the savings of other countries to finance investment in our own country.  This, in turn, allows us to enjoy higher living standards now and into the future, by financing investment which will lead to higher economic growth. ^[6]

There are huge opportunities for Australian agriculture and food producers from the growth of our Asian neighbours.  But to realise these opportunities we will need to make significant investments in our farms and food processing businesses.  ANZ Bank’s 2012 Greener Pastures report found that Australia could more than double the real value of its annual agricultural exports over the next four decades. ^[7]  However the report warned that seizing this prize would require an estimated $1 trillion in investment by 2050.  It is inconceivable that Australia will be able to fund this level of investment by relying on domestic savings alone.  We will need to tap into foreign investment to modernise and expand our agriculture and food industries so they can take advantage of the huge opportunities on our doorstep.

Our plan for attracting investment

Foreign investment proposals are screened by the Foreign Investment Review Board (FIRB) on national interest grounds.  For non-sensitive sectors, screening is required for investments worth $252 million or more.  For private investors from the United States, New Zealand, Korea, Chile, Japan and China this $252 million threshold has been increased in free trade agreements to $1.094 million.  For sensitive sectors such as media, telecommunications, transport and defence manufacturing, and investments by state-owned enterprises, lower thresholds apply. 

However, the Abbott-Turnbull Government has imposed much more restrictive screening thresholds of $55 million for proposed investments in agribusiness and $15 million (cumulative) for investment in agricultural land.  These restrictive thresholds have been the subject of widespread criticism from business.  The new barriers to investment have been criticised by the Business Council of Australia, the Australian Food and Grocery Council, the Queensland Farmers Federation, the West Australian Chamber of Commerce and Industry and other business and farm groups.  Business has said that the new thresholds will make Australia less attractive as an investment destination. 

With the end of the mining boom and with the Abbott-Turnbull Government decisions to erect new barriers to inward investment, Australia’s ranking in an international survey of investor confidence has slipped in each of the last two years.  A.T.  Kearney surveys senior executives of major international corporations to create a ranking of the top 25 markets based on how political, economic and regulatory changes will affect countries’ foreign direct investment inflows in coming years.  Australia has slipped on this FDI Confidence Index from sixth place in 2013, to eighth place in 2014 to 10th place in 2015.  ^[8]

A Shorten Labor Government will make Australia more attractive as an investment destination and support jobs by liberalising FIRB screening thresholds for the farm and food sectors.  Labor would:

• Increase the screening threshold for investment in agricultural land to $50 million (non-cumulative), bringing all investors into line with the agricultural land threshold under the Howard Government’s trade agreements with Singapore and Thailand.
• Remove the agribusiness screening category, a reform which will put agribusiness on the same footing as other industries and which has been supported by the Australian Food and Grocery Council and the Business Council of Australia.
• Review the current regime’s discriminatory treatment of investments in non-sensitive sectors by investors from Singapore, Thailand and non-FTA trading partners and the treatment of agricultural land under the FIRB framework

Under Labor, all proposed investments by foreign governments and state-owned enterprises would continue to be subject to FIRB screening, regardless of the value of the investment. 

Labor’s screening thresholds would be significantly more streamlined than the Abbott-Turnbull Government’s complex, discriminatory and red tape-laden regime, as the comparison tables show.

Abbott-Turnbull Liberal Government’s FIRB screening thresholds

TYPE OF INVESTOR
Foreign government investors
AGRICULTURAL LAND	$0
AGRIBUSINESS	$0
BUSINESS IN SENSITIVE SECTORS [9]	$0
BUSINESS IN NON-SENSITIVE SECTORS	$0
Private investors from:
United States, New Zealand, Chile
AGRICULTURAL LAND	$1,094 million
AGRIBUSINESS	$1,094 million
BUSINESS IN SENSITIVE SECTORS [9]	$252 million
BUSINESS IN NON-SENSITIVE SECTORS	$1,094 million
Japan, Korea, China
AGRICULTURAL LAND	$15 million (cumulative)
AGRIBUSINESS	$55 million
BUSINESS IN SENSITIVE SECTORS [9]	$252 million
BUSINESS IN NON-SENSITIVE SECTORS	$1,094 million
Singapore, Thailand
AGRICULTURAL LAND	$50 million
AGRIBUSINESS	$55 million
BUSINESS IN SENSITIVE SECTORS [9]	$252 million
BUSINESS IN NON-SENSITIVE SECTORS	$252 million
Rest of world
AGRICULTURAL LAND	$15 million (cumulative)
AGRIBUSINESS	$55 million
BUSINESS IN SENSITIVE SECTORS [9]	$252 million
BUSINESS IN NON-SENSITIVE SECTORS	$252 million

TYPE OF INVESTOR	AGRICULTURAL LAND	AGRIBUSINESS	BUSINESS IN SENSITIVE SECTORS [9]	BUSINESS IN NON-SENSITIVE SECTORS
Foreign government investors	$0	$0	$0	$0
Private investors from:
United States, New Zealand, Chile	$1,094 million	$1,094 million	$252 million	$1,094 million
Japan, Korea, China	$15 million (cumulative)	$55 million	$252 million	$1,094 million
Singapore, Thailand	$50 million	$55 million	$252 million	$252 million
Rest of world	$15 million (cumulative)	$55 million	$252 million	$252 million

Labor’s FIRB screening thresholds

TYPE OF INVESTOR
Foreign government investors
AGRICULTURAL LAND	$0
BUSINESS IN SENSITIVE SECTORS [10]	$0
BUSINESS IN NON-SENSITIVE SECTORS	$0
Private investors from:
United States, New Zealand, Chile
AGRICULTURAL LAND	$1,094 million
BUSINESS IN SENSITIVE SECTORS [10]	$252 million
BUSINESS IN NON-SENSITIVE SECTORS	$1,094 million
Japan, Korea, China
AGRICULTURAL LAND	$50 million
BUSINESS IN SENSITIVE SECTORS [10]	$252 million
BUSINESS IN NON-SENSITIVE SECTORS	$1,094 million
Rest of world (inc Singapore and Thailand)
AGRICULTURAL LAND	$50 million
BUSINESS IN SENSITIVE SECTORS [10]	$252 million
BUSINESS IN NON-SENSITIVE SECTORS	$1,094 million

TYPE OF INVESTOR	AGRICULTURAL LAND	BUSINESS IN SENSITIVE SECTORS [10]	BUSINESS IN NON-SENSITIVE SECTORS
Foreign government investors	$0	$0	$0
Private investors from:
United States, New Zealand, Chile	$1,094 million	$252 million	$1,094 million
Japan, Korea, China	$50 million	$252 million	$1,094 million
Rest of world (inc Singapore and Thailand)	$50 million	$252 million	$1,094 million

Labor’s reforms strike the right balance between ensuring Australia secures the investment it needs to create new jobs while ensuring proposals which raise national interest concerns are scrutinised.  Reforming the foreign investment regime will make Australia a more attractive investment destination by reducing red tape, reducing costs both for investors and for local firms seeking to raise capital, replacing the Liberal Government’s complex regime of differential thresholds with a simpler and more consistent system, and removing discriminatory treatment of investors from different countries.

Putting People First In Trade Policy

A Shorten Labor Government will ensure trade policy serves the national interest by introducing greater transparency around trade negotiations, not including Investor-State Dispute Settlement provisions in trade agreements and maintaining local jobs safeguards. 

Maintaining public confidence in trade

Given the importance of trade and investment for Australia’s economic prosperity, and for reducing poverty abroad, it is critical to maintain public support for an open international trading system.  This support will be enhanced by negotiating high-quality trade agreements which liberalise Australia’s trading relationships and are in the national interest.

Labor will respond to community calls for a bigger say in trade negotiations.  We will address concerns about ISDS provisions and their impact on areas such as healthcare and the environment.  And we will ensure that trade agreements support local job opportunities.

Our plan to put people first in trade policy

Labor will put people first in trade policy through the following initiatives.

Transparency in trade negotiations

Labor will end the secrecy surrounding trade negotiations, committing to new levels of transparency to build community confidence and ensure government is accountable. 

Trade negotiations establish binding agreements that regulate long-term international trading and economic relationships.  The Australian Parliament and the Australian people deserve to be better informed about the objectives and outcomes of trade negotiations and the impact of proposed agreements.

Currently the Department of Foreign Affairs and Trade consults industry and community groups about trade negotiations.  But it issues relatively limited public information about the content of negotiations while they are afoot.  Texts are typically not released until after negotiations have been concluded.  This lack of transparency has generated a sense that trade deals, once concluded, are presented to the public and the Parliament as a fait accompli.  These concerns erode public support.

While any sensitive negotiation requires some confidentiality so negotiators can build trust, exchange information and test and explore proposals, the level of transparency in trade talks can be improved without undermining the negotiation process.

The Abbott-Turnbull Government has dismissed public concerns over the lack of openness as scare-mongering.  This is inaccurate and insulting.  Calls for greater transparency have come from respected supporters of trade liberalisation including the Productivity Commission and the former chairman of the Industries Assistance Commission, Mr Bill Carmichael. ^[11] They have argued that greater transparency will achieve better outcomes and allow wider public input to trade negotiations.  The trend in the European Union and the United States has been to negotiate “as openly as possible.”

A Shorten Labor Government will improve consultation and transparency in trade negotiations by:

• Disclosing the Government’s goals on the commencement of negotiations.
• Providing public updates on each round of negotiations.
• Engaging in more intensive consultation with a wider range of stakeholders.
• Engaging in more intensive consultation and briefings of Parliamentarians.
• Releasing draft texts during negotiations where this is feasible.
• Tabling the text of proposed agreements in Parliament before signing the agreements.

These arrangements will be in addition to existing processes including the tabling of trade agreements and accompanying National Interest Analyses in the Parliament and referral of agreements to Parliament’s Joint Standing Committee on Treaties for inquiry and review.

Labor will also ask the Joint Standing Committee on Treaties to inquire into and report on the trade agreement making process, including means to improve the transparency of negotiations and the analysis of the impacts of trade agreements.

Labor’s approach will improve public confidence and mean Government is more accountable.  Improving public and stakeholder input will improve the quality of trade agreements.  Providing more engagement with Parliamentarians will help maintain cross-partisan support for agreements which are in Australia’s national interest.

The cost of improving transparency and consultation will be met from existing resources.

Protecting Australia’s sovereignty

A Shorten Labor Government will not agree to Investor-State Dispute Settlement (ISDS) provisions in new trade agreements.  A Labor Government will seek to remove these provisions from existing trade agreements and work to ensure ISDS provisions do not prevent governments from pursuing legitimate public policy goals.

ISDS provisions allow foreign investors to take legal action against governments where they argue that their property or investment has been expropriated or subject to discriminatory treatment compared to domestic investors.  These actions can be taken in international arbitration tribunals rather than in courts in the country whose government is being sued.  ISDS provisions were originally designed to attract investment to developing countries where investors had concerns about the quality of local legal systems.  However, in recent years, major corporations have increasingly sought to use ISDS provisions to take action against governments in advanced economies, arguing that policies such as environmental protections or healthcare measures amount to an “indirect expropriation” of their assets and bypassing local courts. 

Concerns over ISDS provisions have been raised by mainstream economic and legal experts, including the Productivity Commission, the chief justice of the High Court of Australia, The Economist magazine and academic experts. ^[12]  The concerns include the risk that governments will be deterred from implementing welfare-enhancing policy measures, the granting of legal rights to foreign investors that are not available to domestic investors, exposure of governments to damages awards, and concerns with the processes of ISDS arbitration.

For these reasons, the Gillard Labor Government decided not to accept ISDS provisions in new trade agreements.  But the Abbott-Turnbull Liberal Government reversed this policy and has included ISDS provisions in free trade agreements (FTAs) it has negotiated.

There are also ISDS provisions in several of Australia’s earlier FTAs and bilateral investment treaties.  Some of these were drafted many years ago and do not contain the safeguards, carve-outs and tighter definitions of more contemporary ISDS provisions, exposing Australia to greater risk of challenges to public policy measures.  The US tobacco company Philip Morris, for example, used ISDS provisions in a 1993 investment treaty between Australia and Hong Kong to challenge tobacco plain packaging laws.

A Shorten Labor Government will conduct a stocktake of these agreements, including consultation with interested stakeholders and experts, and develop a negotiating plan to remove their ISDS provisions or, where this is not possible, to update and reform the provisions with modern safeguards through negotiation with Australia’s trading partners.  Labor will also work with the international community to reform ISDS tribunals and procedural rules for ISDS arbitrations, including through the United Nations Commission on International Trade Law and the World Bank’s International Centre for Settlement of Investment Disputes.  This work will consider reforms including: requiring claims, cases, proceedings and decisions to be public; adopting time limitations for claims; allowing consolidated proceedings; ensuring early dismissal of frivolous claims; requiring ISDS tribunals to follow precedents; removing perceived conflicts of interest by temporarily- appointed arbitrators and adopting measures for independence of arbitrators; introducing safeguards against forum and nationality “shopping” by claimants; and appeal mechanisms. 

Labor’s approach will not only ensure that ISDS provisions are not included in new trade agreements, it will also create a pathway for removing or reforming the significant body of existing ISDS provisions that have accumulated over several decades.  This will ensure Australian governments can pursue legitimate public policy reforms in areas such as healthcare, environmental protection and social policy.

The cost of negotiating to reform ISDS provisions will be met from existing resources.

Ensuring trade supports local job opportunities

Trade should support job opportunities for Australians, not reduce them.  Trade agreements have long included provisions on movement of persons and temporary entry which streamline work visa arrangements.  These provisions create valuable opportunities for Australians to work abroad and for Australian businesses to establish and expand their operations in export markets.  They also allow businesses from our trading partners to transfer key executives, professionals and skilled personnel to Australia for the same purposes.  In this way, streamlining work visa arrangements helps boost Australia’s trade, investment and business links, delivering economic benefits.  Many of the hundreds of thousands of Australians working abroad benefit from these arrangements, and they typically return to Australia with valuable skills and experience that contributes to the local economy. 

Movement of persons provisions in trade agreements must support not undermine job opportunities for local workers.  Australia’s temporary skilled migration system strikes a balance between ensuring employers can access the skills they need while supporting job opportunities for local workers.  The key safeguard in this system is labour market testing – the requirement for employers to advertise jobs to local workers first, before turning to workers on 457 temporary skilled migration visas, in the case of trades occupations and nursing and engineering positions.

The former Labor Government ensured that trade agreements allowed Australia to maintain labour market testing safeguards for workers in trades occupations.  But the Abbott-Turnbull Liberal Government’s trade deals have removed labour market testing for “contractual service suppliers” in trades occupations. 

A Shorten Labor Government will ensure trade agreements retain the right for Australia to require labour market testing for workers in trades occupations.  On coming to office we will also seek advice from the Department of Foreign Affairs and Trade and other agencies on the TPP’s temporary entry provisions and options for ensuring these provisions do not undermine job opportunities for local workers.

Maintaining labour market testing safeguards will have no cost impact on the Budget.

Labor’s Record

Labor has a long-standing commitment to trade liberalisation and Australia’s role as an exporting nation.  We recognise that trade can boost economic growth, create jobs, forge more competitive industries and improve living standards by giving consumers greater choice and lower prices. 

We have a strong track record of implementing reforms to boost Australia’s national savings and to ensure Australia is attractive as destination for inward investment.

Labor Prime Minister Ben Chifley took Australia into the new multilateral trading system negotiated as part of the post-WWII international economic architecture.  Chifley’s vision for post-war economic reconstruction was to develop manufacturing industry and new export markets – initially in America and, over the longer-term, in Asia.  Chifley’s recognition of the importance of Asia laid the ground for future Labor initiatives such as the creation of APEC by the Hawke Government and the Gillard Government’s Australia in the Asian Century White Paper which identified and embraced the opportunities for Australia in the region. 

The three most substantial decisions to reduce Australia’s trade barriers – in 1973, 1988 and 1991 – were all made by Labor Governments. 

In the Hawke-Keating era, Labor created occupational superannuation which has massively expanded the pool of national savings available to fund local investment.  The Hawke-Keating Governments also liberalised foreign direct investment policy as part of a wider set of reforms opening the Australian economy to the world – reforms which have underpinned more than two decades of uninterrupted economic growth.

Labor’s commitment to trade reform was maintained by the Rudd and Gillard Governments which concluded FTAs with Chile, Malaysia, the 10 countries of the Association of Southeast Asian Nations and New Zealand, launched negotiations for a global Trade in Services Agreement and contributed to the WTO’s Trade Facilitation Agreement concluded in Bali in 2013.

The Rudd and Gillard Labor Governments pursued policies to boost the role of occupational superannuation, promote Australia as a regional financial services hub, and to ensure that Australia’s foreign investment regime supported the national interest when dealing with proposed investments by foreign state-owned enterprises.

In Government, Labor has ensured trade agreements maintain community confidence and are in the national interest.  Labor led the way in arguing against ISDS provisions with the Gillard Labor Government taking the decision not to include these provisions in trade agreements.  The former Labor Government also introduced labour market testing into the temporary skilled migration program and ensured that trade agreements allowed Australia to retain this safeguard for workers in trades occupations. 

In Opposition, Labor negotiated to strengthen jobs safeguards around the China-Australia Free Trade Agreement in response to shortcomings in the agreement negotiated by the Abbott-Turnbull Government.

The Liberal Alternative

Despite its three-word slogan claiming that Australia is “open for business,” the Abbott-Turnbull Liberal Government has presided over a slowing economy, a deteriorating trade balance and declining business investment while imposing new barriers against foreign investment. 

In 2015, the Government reduced the FIRB screening threshold for agricultural land to $15 million for investors from China, Korea and Japan – but not for investors from the US or New Zealand.  The new $15 million screening threshold for agricultural land also applies where an existing foreign investor seeks to make improvements to their property.  Buying a small adjoining parcel of land, perhaps to facilitate investment in improved farm infrastructure, will trigger a FIRB review if it takes the cumulative value of the investment above $15 million.  So the new rules are not just a deterrent to new investors, they also create disincentives for existing investors to improve or expand their operations.

The Government has also imposed a FIRB screening threshold of $55 million for investments in agribusiness.  It has defined agribusiness so broadly that it would include around half of the food manufacturing sector – including abattoirs, seafood processors, dairy product manufacturers, fruit and vegetable processing, and cake, pastry and biscuit makers.  Adding to the complexity, if just a quarter of a business is engaged in agribusiness the whole business will be caught by the new screening threshold where there are foreign investment proposals.

These new restrictions will make Australia less attractive as an investment destination.  They will make it harder for farmers and food manufacturers to raise capital.  And they will put downward pressure on the values of farm assets.  Not surprisingly, they have been opposed by business and farm organisations.

The Abbott-Turnbull Liberal Government has shrouded trade negotiations in secrecy and has failed to consult meaningfully with Parliamentarians, stakeholders or the public.  It has placed more emphasis on the quantity of trade deals rather than on their quality. 

The Liberal Government has treated concerns about trade with arrogance, dismissing calls for greater transparency.  It has included ISDS provisions in several trade agreements, raising questions about the impact on policies such as Australia’s Pharmaceutical Benefits Scheme. 

It also removed labour market testing safeguards as part of its Free Trade Agreements with Japan, Korea and China.  It was left to the Labor Opposition to secure new migration regulations to strengthen jobs safeguards in response to these Liberal trade deals.

Australia has recorded a trade deficit in all but three of the 32 months since the Abbott-Turnbull Government came to office.  This comes as the Liberals have negotiated low-quality FTAs with China, Japan and Korea.  These Abbott-Turnbull trade deals fell a long way short of delivering full market access for Australian exports – especially for our agricultural exports. 

The Liberals have no plans to help small and medium Australian enterprises embrace the opportunities in our region.  Only Labor will work to negotiate high-quality trade agreements and adopt policies to help local businesses establish themselves in new overseas markets. 

Financial Implications

Any cost associated with these measures will be funded from within existing Departmental resources. 

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[1] Harcourt, Tim, Trading Places: The Airport Economist’s Guide to International Business, NewSouth Publishing, 2014, p 391; Harcourt, Tim, Why Australia Needs Exports: The Economic Case for Exporting, Discussion Paper, Australian Trade Commission and Centre for Applied Economic Research at the University of New South Wales, 2000, pp 5-10. 

[2] McKinsey Australia, Compete to Prosper: improving Australia’s global competitiveness, July 2014, page 3.

[3] ABS, Characteristics of Australian Exporters 2013-14, Catalogue Number 5368.0.55.006, 23 June 2015.

[4] PricewaterhouseCoopers, Passing Us By: Why Australian businesses are missing the Asian opportunity and what they can do about it, 2014

[5] The Economist Intelligence Unit, FTAs: fantastic, fine or futile? Business views on trade agreements in Asia, 2014; Australian Chamber of Commerce and Industry, ACCI Trade Survey, 2015; Australian Industry Group, Submission to Productivity Commission Inquiry into the Effectiveness of Free Trade Agreements, February 2010; Productivity Commission, Bilateral and Regional Trade Agreements: Research Report, November 2010, pp 91-107.

[6] Treasury, “Foreign Investment into Australia”, Treasury Working Paper 2016-1, January 2016, p 10.

[7] ANZ, Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand, ANZ insight, Issue 3, October 2012.

[8] The 2015 A.T. Kearney FDICI - Connected Risks: Investing in a Divergent World

[9] Media, telecommunications, transport, defence and military industries, uranium or plutonium extraction, operation of nuclear facilities.  For investment in the media sector, a holding of at least five per cent requires notification and approval regardless of the value of the investment.

[10] Ibid

[11] Productivity Commission, Bilateral and Regional Trade Agreements: Research Report, November 2010, pp 287-313; Bill Carmichael, “Take Secrecy Out of Trade Talks”, The Australian Financial Review, 15 April 2015, p 46.

[12]Productivity Commission, Bilateral and Regional Trade Agreements: Research Report, November 2010, pp 265-77; The Economist, “The Arbitration Game”, 11 October 2014; Chief Justice Robert French, “ISDS – Litigating the Judiciary”, Speech to Chartered Institute of Arbitrators Centenary Conference, 21 March 2015