Australia signed a free trade agreement with China on November 17. The Coalition government and the media praise the agreement, but other groups are concerned about the implications.
More than 85% of Australian exports will be tariff free initially, rising to 93% in four years. Some of these goods are subject to tariffs of up to 40%. On full implementation of the China-Australia Free Trade Agreement, 95% of Australian exports to China will be tariff free.
The agreement will apply to dairy; beef; sheep; horticultural products; wine; a wide range of seafood (including southern bluefin tuna); aluminium oxide; coal; barley; a wide range of manufactured goods, including pharmaceutical products and car engines; and services including banks; insurers; securities and futures companies; law firms; education; health and aged care; construction; manufacturing; and telecommunications.
In return, private Chinese companies will be able to invest up to a $1 billion threshold before a review is triggered by the Foreign Investment Review Board.
While the government and media herald the deal as providing an $18 billion boon to the Australian economy, the expected payoff is not what it seems.
Writing in the Guardian Greg Jericho said: “The $18bn figure is based on a feasibility study done in 2005 and is concerned with a theoretical agreement rather than the one agreed to this week.
“The 2005 report did not suggest $18bn extra in export revenue — it suggested the extra growth from a China-Australia free trade agreement could 'boost Australia’s and China’s real GDP in the order of US$18bn'."
In fact, the study says “the annual average real GDP growth rate for both countries could increase by around 0.04% over the period 2005-15”.
Even that growth figure is based on a deal that includes sugar and rice, neither of which is in the present agreement.
A Productivity Commission review that looked at free-trade agreements in 2010 found that in the past Australia traded more with the countries with whom it signed an agreement but it also traded less with other countries.
So it is not necessarily more growth, just a change of destination.
Improvements in the export sector can also take investment (and jobs) away from other sectors — there is not actually more investment, just investment in a different sector.
Economist Noriel Roubini, famous for predicting the global financial crisis, recently predicted that the Chinese economy would deteriorate.
"I believe that China could fall towards a growth rate of 6 per cent or below in the next couple of years," Roubini told the ABC on November 11. "That's a very bumpy landing for China and will have an impact also on commodity prices and through a variety of trade channels in the global economy."
Roubini predicts Australia's economy will slow next year, affecting government revenues, prompting a 20% slump in the dollar and requiring further interest rate cuts.
Australian unions are wary of the deal. Unions have written to all parties and independents urging them to reject any deal that does not protect Australian jobs.
Australian Council of Trade Unions president Ged Kearney said in a statement: “The [Tony] Abbott government claims Australian jobs will be protected because the current rules on labour market testing — that genuine skills shortages must exist and jobs have to be advertised locally before foreign workers can come in — will apply to the Chinese deal.
“Apart from the fact that these current labour market testing rules are woefully inadequate, the government’s own information on the trade deal doesn’t even make this guarantee clear.
“Chinese companies will be allowed bring in Chinese workers for projects of $150 million or more, lowered from the previous $2 billion threshold, under new labour agreements called Investment Facilitation Arrangement which allow for so called ‘increased labour flexibilities’.
“Despite the government today saying labour market testing will apply, their own fact sheet says rules for these new agreements will be based on Enterprise Migration Agreements — which do not require labour market testing.
“The Australian community deserves open and transparent answers from their government.”
National secretary of the Australian Manufacturing Workers Union Paul Bastian said: “This will put even more pressure on our manufacturing industry already facing an uneven trading environment in which China heavily subsidises many of its industries through currency manipulation, exploitative working conditions and behind the border trade barriers
“They are hollowing out the advanced, job-creating areas of the manufacturing economy while signing new trade deals with Japan, South Korea and soon China which base our future purely on mining, agriculture and services.”
Some businesses are nervous about the deal. Australian Industry Group chief executive Innes Willox said: "Manufacturers have mixed feelings about the pending China-Australia Free Trade Agreement.
"Many also are nervous about the serious risks of a sudden loss of competitiveness and greater exposure to unfair competition in the domestic market.”
The Australian wool industry could also be affected. James Thompson of Australian Merino Exports told the ABC: “China is slowing. In the last 10-15 years they've taken up to 85 per cent of the clip from Australia. In the last 12 months that's dropped to around 65 per cent.
"I just don't think any commodity wants one particular country to be so powerful. I think you need diversity."
But perhaps the biggest threat in this deal is investor-state dispute settlement.
Coordinator of the Australian Fair Trade and Investment Network Dr Patricia Ranald said: “After all the positive news about access for Australian farmers to Chinese markets, the government summary of the China-Australia Free trade agreement briefly mentions that it includes special rights for foreign investors to sue governments for damages if a change in domestic law can be claimed to harm their investment, known as ISDS.
“The reports of three Australian Parliamentary inquiries show that these international tribunals lack the independence and consistency of national legal systems
"They are made up of investment law experts who can be lawyers one month and arbitrators the next, and there is no system of precedents or appeals, resulting in inconsistent decisions which generally favour investors.
“Claimed ‘safeguards’ for health and environment legislation in ISDS clauses in recent agreements have not prevented foreign investors from suing governments over health and environmental laws.
“The US Lone Pine mining company is suing the Quebec provincial government over environmental regulation of gas mining. The Eli Lilly pharmaceutical company is suing the Canadian national government because of a court decision refusing a patent. The French company Veolia is suing the Egyptian government over a contract dispute, which includes a rise in the minimum wage for workers.
“It is a predictable pattern with this government that we have a grand announcement that a deal has been completed but the text remains secret and the details cannot be scrutinised.
“All we have is the government’s own summary which emphasises the positives. With trade agreements, the devil is always in the detail. We call for the full text of the China free trade agreement to be released well before it is signed for public and parliamentary scrutiny.”
In a Japan-Australia Economic Partnership Agreement signed earlier this year, ISDS was left out, but a clause was included that stipulates that if Australia agrees to ISDS in another bilateral or multilateral agreement then a review should be done to adopt a similar mechanism.
This means that since Australia agrees to ISDS with China it is also, essentially, agreeing to ISDS with Japan.
The Australian government is now seeking a free trade agreement with India.
Indian Prime Minister Narendra Modi said: "We need energy that does not cause our glaciers to melt; clean coal and gas, renewable energy, and fuel for nuclear power."
Such a statement about “clean” coal and gas cannot be good news for the glaciers. Especially since the International Energy Agency predicts that India would triple its coal use and surpass China as the world's largest importer by 2025. For now, it seems the Australian government is only too happy to find another outlet for its huge coal and uranium reserves.