AFTINET submission: China FTA has not met expectations

August 4, 2020: AFTINET’s submission to the DFAT five-year post-implementation review of  ChAFTA is here. A summary is below.

AFTINET criticised the lack of human rights and labour rights in China when ChAFTA was first proposed. Trade and diplomatic tensions between China and Australia have since increased in the context of the US-China trade wars. However, some cooperation continues through international institutions like the WHO and the WTO, which is essential in the context of the COVID-19 pandemic. AFTINET will not be drawn into cold war rhetoric but will continue our criticism of the lack of human rights and labour rights in China, and of those provisions in the ChAFTA that are not in the interests of workers and communities in Australia and China.

Both governments have allowed preferential tariff and other market access arrangements without any enforceable commitments to implement the fundamental ILO Conventions on labour rights. There are no enforceable obligations to implement agreed UN environmental standards, including actions to reduce carbon emissions.

The ChAFTA included an unprecedented range of provisions to increase the scope and numbers of temporary workers who are vulnerable to exploitation because they can be deported if they lose their employment. In the context of the pandemic the Australian government has compounded this exploitation by excluding those who cannot return from government assistance.

The ChAFTA includes Investor-State Dispute Settlement (ISDS), which allows a single foreign investor to sue a government for compensation in an international tribunal if a change in law or policy can be claimed to harm their investment. ISDS rules could result in cases from global companies, including Chinese companies, claiming compensation for Australian government actions during the pandemic that reduced their profits but were essential to save lives.

The ChAFTA commitments on investment and trade-in-services are lopsided. Commitments to reduce regulation of services could also limit the scope of governments to respond to changes like privatisation failures, climate change and the pandemic.

The ChAFTA provisions on product standards are ambiguous and there have been examples of substandard products entering Australia ranging from fabricated steel products, building materials containing asbestos, rail car components containing asbestos, and most recently faulty facemasks and faulty testing kits. These provisions should be reviewed to ensure conformity to Australian standards.

There has been no independent assessment of the economic costs and benefits of the ChAFTA. In terms of trade and investment flows, the ChAFTA has not met government expectations of “hundreds of thousands of jobs” from increased exports. There have been some increases in exports of agricultural products and processed food, but Australia still has a large manufacturing trade deficit with China. The largest increases in Australian exports have come from unprocessed mineral and energy exports that were already very low tariff or tariff-free before the ChAFTA.

There were also predictions of economic growth resulting from increased Chinese investment in Australia and Australian investment in China. In fact there have been declines in Chinese investment in Australia, and Australian investment in China.

Recommendations

  • That the government review the ChAFTA to seek inclusion of legally enforceable labour rights. based on the ILO Conventions on basic labour rights, and to include commitments to the adoption and implementation of UN International Environment Agreements, including the Paris Climate Agreement
  • That temporary workers who have lost their employment in Australia should have access to the same government assistance as other workers.
  • That the MoU on Investment Facilitation, and the side letter removing mandatory skills assessment should be cancelled, and commitments to remove labour market testing for skilled or semi-skilled workers should be removed
  • That Investor-State Dispute Settlement (ISDS) provisions should be removed.
  • That the government change its services commitments in ChAFTA to a positive list rather than a negative list structure, ensure that public services are clearly defined and clearly excluded from services commitments, and that services commitments do not impede governments from regulating in the public interest.
  • That the relevant clauses in ChAFTA should be clarified to ensure that products exported to Australia meet Australian standards. Border inspection resources should also be increased.
  • That the government support policies to reduce dependence on global production chains and enable local manufacturing of essential health equipment, medicines and other strategic industries. Such initiatives could both assist in expanding employment in response to the economic crisis caused by the pandemic and could also address the climate crisis.