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House of Assembly - Fifty-Third Parliament, First Session (53-1)
2014-11-20 Daily Xml
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China-Australia Free Trade Agreement

Mr HUGHES (Giles) (15:36): I rise today to touch upon the trade deal between Australia and China and do so in the context of steelmaking in Australia and, specifically, Whyalla. At this stage very few people have seen the detail contained within the agreement, but the general consensus, at least in the media and amongst commentators, is that there will be a significant net benefit to Australia. South Australia looks like it will benefit in a number of areas. One area that is likely to face additional pressure, however, is manufacturing.

Manufacturing is the biggest employer in Whyalla. Whyalla-based Arrium is Australia's only manufacturer of steel long products. Approximately 80 per cent of Arrium steel production is used in the construction industry. Currently, 65 per cent of Arrium's sales base is under investigation by the Anti-Dumping Commission for unfair trade. Record steel exports from China have led to historically low margins in the steel industry and the dumping of steel in Australia and elsewhere. Andrew Roberts, managing director and CEO of Arrium, said recently:

It is critical that in any free trade agreement the government may negotiate does not result in any weakening of our anti-dumping regime, whether directly or indirectly. Indeed, we believe that a robust anti-dumping regime can only build strength and integrity into a pre-trade environment.

The devil is always in the detail, and until the detail in the trade agreement is made public and its impact on our anti-dumping regime and manufacturing is clear, I will hold off on my praise. I will hold off on my praise because it is not clear what the impact will be on the many people in Whyalla who work in the steel industry.

It is worth noting that the Productivity Commission is not a great fan of bilateral trade agreements, and it has stated that gains from such agreements have been modest. Our free trade agreement with the US increased our trade deficit, or at least coincided with an increase in our trade deficit with the United States. Given the nature of our trade with China, similar outcomes appear to be unlikely.

I think it would be fair comment to suggest that there has been insufficient transparency surrounding the development of our free trade agreements and the lack of robust modelling, not to mention the growing concern over the implications of investor state dispute settlement provisions. The provisions have the potential to undermine sovereignty and constrain elected national and state governments from acting in the interests of the long-term public good.

On a practical note, one initiative that is within our power as a state government when it comes to government spending on construction is a requirement to use Australian manufactured long products. We should back our own. No other state manufactures long products. We should provide procurement support with appropriate provisions. We strongly and rightly advocate for domestic construction of our submarine fleet. We should just as strongly support our steel industry and ensure our procurement policies help provide that support.

I take some comfort from the words of the Arrium CEO when at a recent meeting he said that no large scale closures are planned in steel and it intends to continue running all of its iron ore operations. Steel has done it hard and now iron ore exporter operations are clearly going through a difficult period with a 50 per cent fall in iron ore prices since the beginning of the year. Arrium is now South Australia's only iron ore exporter with the mothballing of IMX near Coober Pedy. With additional capacity coming online globally and a softening Chinese market, we might be in for a challenging period which will impact not just on Arrium but also on those iron ore mining hopefuls in South Australia.

It is possible that the trade agreement might have a positive impact on mineral exports and I would welcome that, but my major concern is the future of steel manufacturing. Our steel industry has proven resilient. I hope that resilience continues.

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