Free Trade Agreements

Adjourned debate on motion of the Hon. J.S. Lee:

That this council—

1. Recognises the benefits of free trade agreements to South Australian businesses and the economy; and

2. Acknowledges the work of the commonwealth government to establish recent free trade agreements with Korea, Japan, and China.

(Continued from 13 May 2015.)

The Hon. T.T. NGO (17:42): I rise today to support this motion that recognises the benefits that free trade agreements have for South Australian businesses and the economy. In particular, I want to acknowledge the free trade agreement between China and Australia. China is the world's second largest economy, making it a suitable country to further benefit Australia's economy with the implementation of the free trade agreement.

China is the largest importer of agricultural produce from Australia, worth around $9 billion to Australian farmers and the broader agriculture sector. China is Australia's largest market for resource and energy products, with Australia exporting over $90 million worth of resources, energy and manufactured products to China in 2013 and 2014. China is also Australia's largest services market, with Australia providing services, including education and financial services, with exports valued at $7.5 billion in 2013-14.

China's investment in Australia has grown significantly over the last 10 years from $2 billion to $65 billion at the end of 2014. China is Australia's largest trade partner, buying nearly a third of Australian exports, valued at nearly $98 billion in 2014, with total trade being worth more than $150 billion. China has already made a significant contribution to Australia, but has the potential to further contribute to Australia's economy. More specifically, South Australia has been a beneficiary of this China-Australia relationship, especially the sister state relationship developed with Shandong Province.

China is currently South Australia's most significant and substantial trading partner, contributing over 25 per cent of the state's total export, approximately $A3 billion in the 12 months leading to October 2014. China has been a significant contributor to the economy of this state, with the implementation of the free trade agreement furthering its contribution and benefiting the people of South Australia. Australia has been one of the very few developed countries that has been able to secure a free trade agreement with China. As one of the very few countries, the implementation of the FTA will allow South Australian businesses to benefit substantially over other international competitors.

The negotiations of the China-Australia free trade agreement concluded in November 2014, with the enabling legislation for the agreement passing the House of Representatives just six days ago, on Thursday 22 October. This prolonged period of time from the conclusion of negotiations to the passing of the enabling legislation could have been largely avoided. This agreement has unfortunately been subject to the game of politics, with the agreement being put at great risk because of a few minor details, losing sight of the bigger picture.

The Premier of South Australia, the Hon. Jay Weatherill MP, and the premiers of Victoria and Queensland, voiced their support for this agreement as it would have come with great benefits for the states and the people of Australia. However, the failure to listen to the states has needlessly jeopardised this agreement.

During the time that federal Labor opposed the legislation of the China-Australia free trade agreement, Labor was accused of telling racist lies, an outrageous claim made by the federal Liberal government. Neither I nor the state government agree with the opposition to the agreement. It could be suggested that the opposition to the FTA was somewhat misguided but not racist. This opposition against the legislation does not automatically entitle it to be labelled as racist. The word 'racist' has long been overused to score points in the game of politics, causing the word to be desensitised. The word 'racist' no longer carries the capability to stimulate a response, consequently being unable to evoke emotions on matters that are truly racist, making it irrelevant.

The federal Labor Party was concerned that the deal would have allowed employers to hire 457 visa workers without having to advertise jobs for local workers first. Labor was also concerned that mandatory skills assessments for important trades would be abolished. The concerns raised regarding certain elements of the FTA were purely based on the ALP and the unions wanting to ensure that Australian jobs were not undermined, not the pursuit of a racist agenda, as the Liberal Party would like you to believe.

I am pleased that these shortcomings will be overcome by amendments to the migration regulations, which will apply to workers from all nations, put forward by the federal Labor opposition, which the current Liberal government has agreed to. These include the requirement to pay market rates for overseas workers employed under the 457 visa and the requirement for workers to obtain the relevant trade licences, as well as the need for businesses to advertise locally before applying to hire overseas workers under the 457 visa. These are strong and prudent measures which will ensure workers' rights are protected. The Labor Party has a long and proud history of standing up for Australian workers to ensure that they get the best deal possible.

The agreement currently before the Senate is expected to be approved when the Senate next sits, during November. Once fully implemented, the China-Australia free trade agreement will dramatically decrease or eliminate tariffs, allowing 95 per cent of Australian goods exported to China to enter duty free. This liberal access to each other's markets for goods, services and investment will allow Australia to take advantage of China's rapid growth.

Australia has also signed on to the Trans-Pacific Partnership which means Australia is liberalising trade with China as well as America, Japan and its allies. Not many other countries are in this privileged position; a position that allows Australia to be competitive and open new trade and investment opportunities.

The Hon. A.L. McLACHLAN (17:50): I rise to speak in support of the motion that this council recognises the benefits of free trade agreements to South Australian businesses and the economy, and acknowledges the work of the commonwealth government to establish free trade agreements with Korea, Japan and China.

The federal government first began to scale back its economic protection of Australian industries in the 1980s. At this time Asia was undergoing a phenomenal surge of growth and, in Australia, we began to realise that we were increasingly becoming reliant on our trade with Asia and sensibly commenced trade liberalisation. This resulted in a remarkable shift in Australia's pattern of trade as products from Asia that were previously excluded by tariffs were now able to enter our economy.

The result of the economic growth in Asia was that Australia, for the first time, was placed within the fastest-growing region of the world. Today, Australia is somewhat unusual compared to other wealthy nations because its trade profile is still dominated by commodity exports, mainly minerals, oil and gas. Australia's heavy reliance on the export of primary resources has been responsible for driving Australia's economic growth over the past decade. Going forward, an ongoing reliance on certain sectors threatens to leave the Australian economy vulnerable.

Australia's most important trading partners in order of importance are: China, Japan, the US, the Republic of Korea, Singapore and the United Kingdom. This trade profile reflects Australia's close proximity to Asia and its ability to provide a reliable goods trade. The federal government's recently-established FTAs will provide better Australian access to Chinese, Korean and Japanese markets and improve the competitive position for Australian exports, greater prospects for increased two-way investment and reduced import costs for Australian businesses and consumers alike.

Recent research undertaken by the Department of Foreign Affairs and Trade suggests that the trade of Australia's natural resources is slowing and Australia will need to develop new markets in the region if it is to remain competitive. The Department of Foreign Affairs and Trade reports that:

Mining accounts for about two-thirds of Australia's exports to Asia, and even more to China. But this boom will pass, and Australia must become better at selling other things to affluent Asia.

In South Australia the state government has reported that manufacturing remains an industry of great promise for small and medium enterprises that are able to produce high-quality innovative products for a niche global market; however, their ongoing success will be determined by the ability of the companies to operate under a business model which delivers value by differentiation through innovation.

This changing approach means that despite the forfeiture of more than 100,000 manufacturing jobs across the country over the last seven years, South Australia has opportunities to develop its manufacturing sector. The key to making the most of this opportunity will lie in the ability of business and government to work together to ensure that manufacturing in Australia encourages innovation.

To succeed, global manufacturing relies on a strategic approach to innovation with an emphasis on quality and design, high-calibre management and workforce skills which can only be effectively cultivated in a supportive policy and investment environment.

The Global Innovation Index is a global comparative study of 142 countries undertaken each year by Cornell University, INSEAD and the World Intellectual Property Organisation, and provides a useful overview of the strengths and weaknesses of areas of the economy which are seen to foster innovation. According to this dataset, Australia ranks 17^th overall on the global scale, behind Switzerland at the top, the United Kingdom, the United States, Singapore, Ireland, Canada and Norway, amongst others.

It is interesting to note that, according to this guide, that Australia outstrips Switzerland in some areas, including ease of starting a business, levels of university enrolment, access to non-agricultural products, and amounts of human capital and research, but performs well below Switzerland on areas such as knowledge creation, scientific and technical publications, and high-tech exports. These areas represent capacity for improvement in Australia and should be developed and encouraged accordingly.

The federal government's recent FTAs established with China, Japan and Korea are representative of the importance and focus of Australia's trade relations; however, in order to build Australian competiveness we cannot become complacent. Australia cannot just rely on its reserves of raw resources. They will not last.

As a state in the federation, we need to harness the potential of industries, such as high-tech manufacturing, by allocating adequate community resources to encourage creativity and design integration. In this way, we will create the conditions ripe for investment in innovation. I commend the motion to the chamber.

The Hon. J.S. LEE (17:56): I would just like to thank the Hon. Tung Ngo and the Hon. Andrew McLachlan for their contributions to support this free trade agreement motion. I am pleased to find out that through the course of various different negotiations Mr Bill Shorten, the federal leader of the Labor opposition, has finally come to his senses with his party to support the free trade agreements that were proposed and put in place wonderfully by the commonwealth government of the Liberal and National Party Coalition. I do thank them for their contributions and I wish all the South Australian companies, the enterprises, pursuing their export opportunities in Japan, China and Korea all the great success of capitalising on the free trade agreement. I commend the motion.

Motion carried.