DFAT boss disputes free trade, ISDS ‘misunderstandings’

By David Donaldson

Tuesday November 10, 2015

Former DFAT secretary Peter Varghese.

Responding to some of the public debate about free trade around the signing of the Trans-Pacific Partnership and the China-Australia Free Trade Agreement recently, Department of Foreign Affairs and Trade secretary Peter Varghese took aim at some of the “misconceptions” about the deals on Tuesday.

Taking on claims that the agreement will not make much difference to economic growth, Varghese told a Committee for the Economic Development of Australia event that modelling forecasts the Korea, Japan and China FTAs to be worth a combined $24.4 billion in total additional income to Australia between 2016 and 2035. “By 2035, Australia’s exports to these three markets are forecast to be 11% higher than they would be if Australia had not secured these deals.”

ChAFTA “will not undermine Australian labour laws, conditions or wages”, he argued, and “nor is it inconsistent with Australia’s existing immigration policy.”

“These two-way commitments will support the more predictable movement of goods, services and capital between our two economies, deepening economic integration and transforming how Australia and China do business.

“Australia has also agreed that Chinese companies registered here and making large investments in infrastructure projects in Australia can be assured of access to skilled overseas workers throughout the project.

“But those companies cannot do so without advertising and looking for suitable Australian workers first.”

“We cannot allow the good to be the enemy of the best.”

He also contended that much discussion on the controversial issue of investor-state dispute settlements came from a “fundamental misunderstanding”:

“These provisions, an important part of ChAFTA’s chapter on investment, do not allow Chinese companies to sue the Australian government simply because they make a loss on investments — we would never agree to that.

“Rather, they establish a mechanism that will give Australian or Chinese investors an option to pursue international arbitration in circumstances where the investor or investment is subjected to discriminatory treatment, compared to local companies.

“This mechanism is subject to explicit safeguards that protect the right of Australian governments to regulate in the public interest, including in the areas of health and the environment.”

And responding to concerns that bilateral agreements were merely displacing trade with other countries, or even undermining progress on preferable multilateral deals, he said:

“We cannot afford to stand apart from undertaking bilateral, regional or plurilateral trade deals. We cannot allow the good to be the enemy of the best.

“To not participate would carry with it a significant potential opportunity cost, as Australian businesses’ international competitive position erodes.”

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