AFTINET submission: The Peru-Australia Free Trade Agreement (PAFTA)

May 3, 2018: The AFTINET submission to the Peru-Australia Free Trade Agreement is available to read in full here, and summarised below. The JSCOT report is due on August 22, 2018, after which Parliament will consider the implementing legislation. Our assessment is there is insufficient information for support the implementing legislation.

Relationship between PAFTA and the TPP-11

Peru and Australia have signed both the TPP-11 and PAFTA and both may eventually be ratified. This raises the question of the relationship between the two agreements. The standard answer is that companies or governments can choose to apply the terms of the agreement that is more favourable to their interests. This means, for example, that companies wishing to trade or invest can choose to apply provisions in the TPP-11 which are more favourable to their interests but have less safeguards for public regulation than PAFTA. The summary below deals with the issues on which PAFTA differs from the text of the TPP-11.

ISDS

It is disappointing that PAFTA includes ISDS provisions, since there is increasing evidence of the flaws in the ISDS system including that the EU and US are moving away from ISDS, and that ISDS institutions have acknowledged its flaws and are reviewing it structures. AFTINET believes that ISDS should not be included in any trade agreements.

Nevertheless, we welcome the fact that PAFTA, unlike the TPP 11, excludes ISDS cases against public health measures, specifically mentioning cases related to the PBS, Medicare, the Therapeutic Goods Administration and the Office of the Gene Technology Regulator. There is no specific mention of tobacco regulation, so it remains to be seen whether the general exclusion for public health measures will deter tobacco companies from lodging claims.

However, the need for these specific carveouts casts doubt on the effectiveness of the general safeguards for other public interest legislation contained in the text and raises the question of why other public interest regulation like environmental regulation or labour regulation is not specifically excluded.

Also, because both TPP-11 and PAFTA agreements may eventually apply, it may be open to a foreign investor from Peru or Australia to choose to use the provisions in the TPP-11 which do not have the public health carveouts contained in PAFTA.

Temporary movement of people

Australia is a nation built on immigration and has a permanent migration scheme which has created our vibrant multicultural society. Permanent migrants have the same rights as other Australians. Their employment is not dependent on the sponsorship of one employer and they cannot be deported if they lose their employment.

Temporary migrant workers are in a far weaker bargaining position because they are sponsored by a single employer and loss of their employment can lead to deportation. This leaves them vulnerable to exploitation. AFTINET opposes the inclusion of temporary worker provisions in trade agreements because it treats workers as if they were commodities.

Nevertheless, we welcome the fact that the government has maintained labour market testing for contractual service providers in the PAFTA (DFAT 2018e: 6). However the removal of labour market testing for contractual service providers remains in the TPP-11, despite the fact that they were negotiated over the same period. This begs the question of why the two agreements are inconsistent.

Labour and environment

Both the labour and environment chapters in PAFTA have been truncated to a few pages compared with the TPP 11. There are far fewer commitments and none are legally binding or enforceable through the state-to-state dispute mechanism in the agreement.

They do not contain even the relatively weak commitments and convoluted dispute processes in the TPP. This means that the Peruvian or Australian governments could choose to use the weaker protections in PAFTA.

Conclusion

The Government has refused to undertake any independent studies of the economic, health, environmental and other impacts of PAFTA despite advice from key bodies like the Productivity Commission, the Australian Competition and Consumer Commission, environment and public health experts. In the absence of such information, the committee does not have enough information to support the implementing legislation.