ALP policy should ensure trade deals do not undermine regulation in the public interest

Dr Patricia Ranald, Convener of the Australian Fair Trade and Investment Network, (AFTINET) Research Associate at the University of Sydney

As an advocate for fair trade based on human rights, labour rights and environmental sustainability, I read Senator Penny Wong’s policy speech on Australia in the global economy with great interest.

The positives include her pledge to scrutinise the Abbott government’s trade policies to ensure they deliver the best deal for Australia. There is recognition that trade policy must be accompanied by active government investments in people, in skills and capacities, in education, innovation research and infrastructure. These essential investments are supported by most Australians, as shown by the fierce public and parliamentary opposition to the current Coalition Government proposals to cut them.

Senator Wong also criticises preferential bilateral trade agreements, like the Korea-Australia free trade agreement. As the Productivity Commission found in 2010, these have not delivered the claimed economic benefits, which were based on economic modelling which overestimates the gains and underestimates the costs. The Productivity Commission noted that proposals in these agreements like stronger patents and higher prices for medicines and rights of investors to sue governments have both economic and social costs which are not measured in economic modelling. Senator Wong herself notes that the claimed economic gains from the Korea-Australia free trade agreement are barely measurable.

The striking thing about the speech is that it subscribes to a lofty and generalised theory of the benefits of free trade, which ignores the realities of power relationships in the global economy, and in regional trade agreements like the Trans-Pacific Partnership agreement (TPP). Senator Wong argues that Australia should support the TPP’s goal of reducing barriers to trade and investment. But as Nobel prize-winning economist  Joseph Stiglitz has noted, despite these stated goals, the TPP is not mainly about reducing tariffs or other barriers, and but about changing domestic regulation in ways which suit the export industries of the most powerful players.

The TPP involves the US, Japan, Australia and nine other Pacific Rim countries. But the agenda is dominated by US proposals made on behalf its largest export industries. Pharmaceutical companies want longer and stronger patents on medicines, leading to higher medicine prices. Media content owners want extension of copyright payments and restrictions on Internet downloads, with criminal penalties. This would cost schools, libraries and consumers more, and make the Internet more difficult to use. Agribusiness companies want to restrict government regulation of food labelling for health and nutritional reasons. And all these industries want special rights for foreign investors to be able to sue governments for damages in an international tribunal if they can claim that a law or policy harms their investment, known as ISDS. The Philip Morris tobacco company is currently using ISDS in an obscure Hong Kong Australia investment agreement to sue the Australian government for damages over plain packaging legislation, despite the fact that the Australian High Court found there was no right to damages under Australian law.  

The TPP has generated community opposition to these proposals in most countries, including the US, on the grounds that they are using trade negotiations conducted behind closed doors to make changes to domestic policies which would disadvantage most people. Surveys show that most Australians believe these are public interest issues which should be debated through an open democratic parliamentary process, not secretly signed away in trade negotiations.

Negotiations have now dragged into their fifth year, and US and Japan, the two major players, are deadlocked over access to each other’s agricultural and vehicle markets, leaving others like Australia waiting on the sidelines. Opposition in the US Congress means there will be no US decisions on the negotiations until after the US mid-term Congressional elections in November.

In practice, ALP policy has so far opposed extensions of patents on medicines, extensions of copyright, restrictions on the right of governments to regulate tobacco and food labelling, and has opposed ISDS.

Despite promises at the beginning of the process, TPP negotiations have not yet reached agreement about enforceable labour rights and environment standards, which are need to prevent unfair competition, and which are also supported by ALP policy.

It is disappointing that these policies were not featured in a major policy speech. ALP trade policy should continue to oppose any reduction in the right of governments to regulate in the public interest, should oppose ISDS and should support enforceable labour rights and environment standards. These policies should not be signed away in the TPP or other trade agreements.