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Australia-Chile FTA passes parliament
By Michael Cebon | November 14, 2008
The implementing legislation for the Australia-Chile Free Trade Agreement – Customs Amendment (Australia-Chile Free Trade Agreement Implementation) Act 2008 – passed the Australian Senate yesterday. (You can read the House of Representatives “debate” on the bill here). The media seems to have completely ignored this, presumably because the economic impacts for Australia will be relatively minor.
Indeed so minor, that it really begs the question of why the government went to the trouble of negotiating the agreement in the first place.
In 2006, Australia’s total merchandise exports to Chile were just $233 million – that is about one thousandth of our total merchandise exports of $180billion.
Perhaps the real reason is that 57% of Australia’s exports to Chile are coal, and the fact that we now have an FTA with them probably says more about the power of the coal industry in Australia than anything else.
However, there has been some real concern from Australian farmers that the deal will have a significant adverse impact on Australian horticulture. Because Chile is in the southern hemisphere its produce – grown by workers paid about 40% less than Australian horticultural wages – will increasingly be competing directly with Australian produce on supermarket shelves.
A further concern is that this is Australia’s 3rd FTA (alongside agreements with Thailand and Singapore) to include “investor-state” provisions, which allow foreign investors to demand compensation from governments for regulations or laws which “expropriate” their property rights, which can include their right to future profits. Under the FTA, investors can “sue” the government at the International Centre for Settlement of Investment Disputes (ICSID), an undemocratic, non-transparent arbitration court run by the World Bank. Thus the agreement confers rights on foreign investors beyond those enjoyed by Australian investors.
This agreement explicitly allows “expropriation” to include government actions which have “an effect equivalent to direct expropriation without formal transfer of title or outright seizure”. Such provisions have been abused by large corporations – most famously under the NAFTA agreement – to demand large sums of money from governments resulting from new environmental and health regulations.
The negotiators of this FTA have tried to avoid this with a section which states that “Except in rare circumstances, non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations.”
The big question is: what are the “rare circumstances” where public health or environmental laws DO constitute expropriation? And will the government have to explore this in future in an undemocratic, international arbitration court whose decisions are binding?
For some other concerns with this FTA, you can read the submission to the Joint Standing Committee on Treaties from AFTInet.
UPDATE: you can also read some concerns about intellectual property in the Australia-Chile FTA from ANU academic Mathew Rimmer.
Topics: Australian Trade Policy | 1 Comment »
December 2nd, 2008 at 11:35 am
Hey this is really scary, Mike, that they have investor state provisions.
I wonder how they are justifying it, if it was taken out of the A US FTA with all that public debate. Were there any media reports about this?
Or were the investor state provisions part of a template that negotiators started from, and hence felt like they didn’t have to justify them?