Campaign against inclusion of ISDS in the Korea-Australia agreement

Campaign against inclusion of ISDS in the Korea-Australia agreement

By Dr Patricia Ranald

Australian Trade Minister Robb announced on December 5 that the main elements of the Korea-Australia free trade agreement had been settled between the two governments. The minister added that he had agreed to include investor rights to sue governments (Investor State Dispute Settlement or ISDS) as a trade-off for market access for agricultural products to the Korean market. The previous government has a policy against including ISDS in trade agreements.

Despite the Minister’s public announcement, the text of the agreement is not publicly available. The detailed text is still being finalized, translated into Korean and subject to legal checks. This process will take place over December and January. The final text will be presented to Cabinet, most likely when Parliament sits from February 11, 2014. Cabinet will then make a decision about signing the text of the agreement. Only after this decision will the text be tabled in Parliament for 20 sitting days and available for public discussion. The Joint Standing Committee on Treaties will review the agreement, but is an unable to change the text. The committee can make recommendations, but they are not binding on Cabinet. Parliament cannot change the text of the agreement once it is signed, but it does vote on the implementing legislation, so there will be opportunities for further campaigning.

Without the text, the only information available is the three-page summary from the Department of Foreign Affairs and Trade (DFAT). The Minister’s claims cannot be checked against the text.

The Minister claims that the “public welfare, health and the environment” have been carved out from the Investor-State dispute clause (ISDS), and so there is no need to fear that Australian governments could be sued over health or environmental legislation. Such “exclusions” in the Peru –US Free Trade Agreement and the US-Central America Free Trade Agreement didn’t stop the Renco lead mining company from suing the Peruvian government when they were required to clean up their lead pollution, or the Pacific Rim company from suing the El Salvador government because it refused a mining license for environmental reasons. Investors have pursued cases in other countries by claiming the process of developing the law did not include “fair and equitable” treatment for them.

The inclusion of ISDS is a dangerously short-sighted policy, which could have dire consequences for rural communities which want more government regulation of coal seam gas mining for environmental reasons. The US Lone Pine mining company is currently using an investor rights clause in the North American Free Trade Agreement to sue the Canadian Quebec government because it dared to conduct an environmental review of gas mining. Fifty-four rural groups have written to the Trade Minister expressing their strong opposition to investor rights so sue governments because their fear similar action could be taken here following NSW and Victorian Government state environmental reviews of coal seam gas mining. Many Australians have also been outraged by the current attempt of the Philip Morris tobacco company to sue the Australian government for damages over plain packaging legislation, using an investor state dispute clause in an obscure Hong Kong Australia investment agreement.

AFTINET opposes trading off the right of Australian governments to regulate by granting foreign investors special rights to sue governments in return for market access for agricultural products.

But even for those who accept the principle of this trade-off, there is little detailed information in the DFAT summary about the claimed market access benefits of the agreement. The summary says that agricultural industries will be the main winners from the agreement. Australian sugar exporters are claimed to benefit immediately from the removal of all Korean tariffs after the agreement comes into force.

However, other tariffs will we be reduced at a snail’s pace. Beef tariffs will be reduced to zero over a fifteen year period to 2030. Crude petroleum and natural gas tariffs will be reduced to zero over ten years, and the reduction period for cheese, wine and wheat is not specified. The Korean government succeeded exempting rice tariffs from the agreement, so Australian rice farmers will not get any increased access to the Korean market. Ruth Wade, the Executive Director of the Ricegrowers’ Association said ‘This is an FTA in name only’.

The DFAT summary admits that Australian manufacturing industry will lose from the agreement, with impacts on the motor vehicle industry, motor vehicle components, steel products and textiles, clothing and footwear. Although details are not given, given, it appears commitments have been given to reduce Australian tariffs in these areas to zero. In the context of General Motors announcement to cease manufacturing in Australia, this is another body blow to Australian manufacturing industry.

The claimed overall benefits to the Australian economy are based on a seven year old 2007 study by the Centre for International Economics, using a methodology assumes that all tariff and nontariff barriers between the two countries have been removed, but only after 15 years. The study assumes that there are no real-life costs like unemployment in manufacturing industries. It assumes that a middle-aged unemployed vehicle industry worker will be able to find work at Myers or MacDonald’s. We know these assumptions do not fit with reality.

This study claims to analyse the benefits to the Australian economy as a whole when all tariffs reach zero after 15 years in 2030. The benefits are estimated to be a minuscule $653 million added to Gross Domestic Product (GDP) on an annual basis, after 2030. Given that Australia’s current GDP is valued at over 1,520,000 billion dollars, and that this figure will be much greater in 2030, the percentage increase in GDP will be so insignificant that it is hardly measurable, which is presumably why the study does not include it.

The only way the claims of exemptions for welfare, health and environment for ISDS and significant market access of this agreement can be tested is for the text of the agreement to be released before it is signed by Cabinet. This would enable public and parliamentary scrutiny before it is signed. The probable February timetable means we have more time to continue to campaign. If you have not already done so, please sign and share our petition: Stop foreign investors suing our governments – reject Korea trade deal.