premier of western australia - parliament of australia

Premier of Western Australia

Our ref: 200403517/13499

BY~Dr Andrew Southcott MPChairJoint Standing Committee on TreatiesParliament HouseCANBERRA ACT 2600

Dear Dr Southcott

Thank you for your letter, dated 11 March 2004, inviting the Western AustralianGovernment to comment on the proposed Australia-United States Free TradeAgreement (AUSFTA).

Attached is the Western Australian Government’s submission to the inquiry of theJoint Standing Committee on Treaties into the proposed agreement.

Given the complexity and length of the draft text of the AUSFTA, a longer periodbetween the public release of the text and closing date of submissions for the inquirywould have been useful. Western Australia will continue to analyse the text and mayprovide additional comment as appropriate.

Again, thank you for the opportunity to provide comment.

Yours sincerely

DR GEOFF GALLOP MLAPREMIER

16 APR 200k

197 St George’s Terrace, Perth, Western Australia 6000Telephone (08) 9222 9888 Facsimile (08) 9322 1213 EmaiL: wa-government®dpc.wa.gov.au

www.premier.wa.gov.au

SubmissionNo: . .

3 ~

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JOINT STANDING COMMITTEE ON TREATIES INQUIRY

AUSTRALIA-UNITED STATES FREE TRADE AGREEMENT

WESTERN AUSTRALIAN SUBMISSION

INTRODUCTION

1.1 WesternAustraliasupportedthedevelopmentof theAustralia-UnitedStatesFreeTradeAgreement(AUSFTA) asit recognisesthatfreetradecanoffer substantialbenefitsfornations. In addition,theCommonwealthGovernment’sinitial analysisindicatedsubstantialbenefitsarisingfrom theagreement.WesternAustralia’spreliminaryanalysisof theagreement,however,suggeststhatthe impacton thenationaleconomyisnot likely to be large,andthat thebeneficialoutcomesfor WesternAustraliaarelikelyto be relativelymodest.

1.2 WesternAustraliawelcomesthe movetowardstradeliberalisationin theagreement.Thereis thepotential for somegainsfor WesternAustraliathroughtheAUSFTA, forexampleincreasedlamb andwine exportsandcheapermanufacturedgoods.

1.3 Forthemostpart’ however,therewill be little changeto significantareasfor WesternAustralia,suchasexportsofmineralsandenergy. In addition,movestowardsliberalisationin someareashavebeendisappointinglysmall, andrepresentlostopportunitiesto expandWesternAustralia’sexportsin industriessuchasshipbuildingandbeef.

1.4 Giventhecomplexityandlengthof theAUSFTA, a longertime periodto undertakeanalysisandpreparesubmissionsto this inquiry would havebeenappropriate.Henceonly apreliminaryanalysisofthe impactof theagreementon WesternAustraliahasbeenundertaken.

1.5 It is notedthattheCommonwealthGovernmenthascommissionedfurthereconomicanalysisandmodellingfor theAUSETA andthat this work includestheimplicationsoftheagreementfor theStatesandTerritories.

SPECIFIC ISSUES

2 AGRICULTURE

2.1 ThereareanumberofelementsoftheAUSFTA thatare expectedto be positive for theState’sagriculturalexports.

2.2 Potentialopportunitiesfor WesternAustraliaexist for theexportof horticultureproductssuchasstrawberriesand olives (subjectto industryexpansion),dairyproducts,

WesternAustralia April 2004

beef,lamb andwine. Theremayalso be newopportunitiesfor WA industry from theremovaloftariffson seafoodproducts.

2.3 Theagreementis not,however,ascomprehensivein agricultureaswashoped. Theproductsof mostvalue,includingbeefanddairy, madesomegainsbut mostgainswillnot be realisedfor periodsup to 18 yearsand longer.

2.4 Thewine industrywashopingthat theremovalof technicalbarrierswouldoffersignificantexportopportunitiesand,althoughUS import tariffs on winewill beremovedby year 11, thetechnicalandlabelling issuesrelatingto theblendingandvintageofAustralianwine, aswell asdistributionissues,werenot adequatelyaddressedandremainsignificantbarriersto wine exports.

2.5 TheUnited States’refusalto liberalisetradein thesugarindustry is disappointing.AlthoughQueensland’ssugarindustryhasbeenthemainfocusin themedia,WesternAustraliaalso hasa sugarindustryandhasmissedouton potentialbenefitsthroughtheAUSFTA’s exclusionofsugar.

2.6 RecentnewspaperreportsindicatethatUS farmersandfarmergroupsareundertheimpressionthat follow-up talkson SanitaryPhyto-Sanitary(SPS)items,includingAustralia’squarantineand food safetyregulations,could leadto considerableexpansionof exportsto Australia. TheAmericanFarmBureauhasindicatedthattheagreementcould leadto theeliminationof existingquarantinerestrictionson a numberofproductsincluding pork,poultry, fruits, nutsandvegetableproducts’.

Thesituationrelatingto SPSandthecommitmentAustraliahasmadeto theUS needsclarificationin bothcountries.

2.7 Thecurrentquotaincludesall beefproducts.Theadditionalquota,however,excludescarcassesandhalf-carcassesofbeefandprocessedbeefmadereadyfor particularusesby theconsumer,thatis ‘fancy cuts’. It is noted,however,thatthis stagethis is not asignificantissuefor WesternAustraliaastheexportof this productoverthepastfiveyearshasbeenquite low.

2.8 AlthoughAustralianagriculturedid not makethegainsinitially hopedfor, the lossestoagricultureshould alsobe minimal. Currenttariffs on theimport of agriculturalproductsintoAustraliaarelow by world standards(averageaboutthreepercent)sotheremovaloftariffs on all agricultural importsfrom theUS shouldnothavea significantimpacton Australianagriculturalindustries.

2.9 With respectto singledeskarrangements,it is notedthatWesternAustralia’scurrentmarketingarrangementsfor eggsandpotatoesunderThePotatoMarketingAct, 1946(WA) andThe MarketingofEggsAct, 1945 (WA) will remainunderAnnex I.

2.10 With respectto thetemporaryadmissionof goods,Article 2.5 of theAUSFTA statesthatgoodstakeninto theUS duty freeto be usedin tradedemonstrationsetccannotbeconsumedin theUS andmustbe removed. Article 5 oftheConventionon TemporaryAdmissionof 1990(IstanbulConvention),however,statesthat samplesoffoodand

“WRAP-US farmersbelieveAustquarantinewill be changedin theFTA”, AustralianAssociatedPress

FinancialNewsWire, 16 March 2004

WesternAustralia 2 April 2004

beveragesthat arenot distributedin packsareto be consumedat theevent.

Bothpartiesto theAUSFTA areobliged to meettheirinternationalobligationsunderthe IstanbulConventionandit needsto be confirmedthattherelevantchapterin theAUSFTA doesnotunderminethat.

3 MANUFACTURED GOODS

3.1 TheAUSFTA should haveapositive impactfor WesternAustraliaregardingthepurchaseofmanufacturedgoods. Theimmediatereductionoftariffs for manufacturedgoodsis expectedto increasethecompetitivenessofgoodsfrom theUnitedStates.WesternAustraliaalsoexpectsto benefitfrom thereducedprice ofconsumergoods,suchascars,andalsofrom theincreasedcompetitivenessoffarmersandminersasaresultof lower input costs. However,it remainsto be seenwhetherthecostof businessinputs,suchasheavyequipmentusedin mining, will fall.

3.2 Many ofthechangesundertheAUSFTA, however,will not resultin a significantincreasein WesternAustralia’sexportsto theUnitedStates.

3.3 It is anticipatedthatthebenefitof theAUSETA for WesternAustralia’smining andenergyexportswill be modest.Mineralsandenergycommodities(excluding‘confidential items’ suchasalumina)comprisedapproximatelyone-thirdof allmerchandiseexportsby WesternAustraliato theUnitedStatesin 2003. UndertheAUSFTA, all exportsofmetalsandmineralswill be duty free. However,theratesofprotectionapplyingto Australianexportsofpetroleum,mining andbasicmetalexportsin 2002-03werequite marginal.

3.4 WesternAustraliais unlikely to gainsignificantly from thenewarrangementsby which97 percentof exportsofmanufacturedgoodsto theUnitedStateswill be duty freefrom thecommencementof theagreement.WesternAustralia’slargestmanufacturedgoodsexportcategoryto theUnitedStatesis medicaments,followedby pearlandstones.While theeffecton theAUSFTA on exportsofthesecommoditiesis notknown,it canbeassumedthatthesearequite specialisedproductsand,therefore,mightbe less sensitiveto anyprice changesthat result.

4 RULES OF ORIGIN (ROOs)

4.1 It is understood,from theCommonwealthGovernment,that, in general,AustralianindustryhasacceptedtheUnited Statesapproachto theRulesofOrigin (ROOs).

4.2 TheROOsare,however,complexandit is necessaryto knowthenatureoftheindividual productsto determinetheir impact. Any additionalanalysison thelikelyimpactof ROOsonWesternAustralianindustrywould be welcome.


5 TECHNICAL STANDARDS

5.1 Theestablishmentof amechanismto addressthedevelopment,adoption,applicationorenforcementof standards,technicalregulationsor conformity of standards,technicalregulationsor conformityassessmentproceduresis welcome. It is notedthatthisprocessdoesnot deliverimmediategainsandthereis no meansto assesstherateofprogress.

6 INTELLECTUAL PROPERTY

6.1 It is reassuringthat theobligationslargely reflectAustralia’scurrentsystemofprotectionfor intellectualpropertyandthattheobligationsdo notapply to subjectmatterthat is alreadyin thepublic domainatthetimetheagreementcomesinto force.

6.2 It is noted,however,thatAustraliawill be requiredto align its intellectualpropertylawsandpracticesmorecloselywith thoseof theUnitedStates,including increasedobligationsfor InternetServiceProvidersandincreasedenforcementprovisions. Thisis acomplexareaandWesternAustraliawould welcomefurther informationon thelikely impact,includingcosts,of theobligationsunderthis chapterfor WesternAustralianbusinesses.

6.3 TheWA FarmersFederationandgenericagriculturalchemicalmanufacturershaveexpressedconcernthattheIntellectualPropertychapterof theagreementextendsthedataprotectionfor newdatato 10 yearsandthatis not consistentwith proposednewdataprotectionLegislation.

TheCommonwealthDepartmentof Agriculture FisheriesandForestry,hasadvised,however,thattheAUSFTA is consistentwith theproposednewdataprotectionlegislationandthat theobligationextendsto eight yearsonly for newdata,whereit isnot accompaniedby theconjoint approvalsofcertainnewuses,which in theproposalattractsthethreeadditionalone—yearextensions.

7 MEDICINES

7.1 In relationto medicines,thedraftAUSETA impactson thefollowing areas:• Pricespaidfor medicines

• Timely availability ofnewmedicines

• Direct to consumeradvertisingof prescriptionmedicines.

7.2 Thereis concernthatthis draft agreementincludesprovisionsthat are likely to leadto ‘aan increasein thecost ofmedicinaldrugsin AustraliathroughthePharmaceuticalBenefitsScheme(PBS) andan extensionofmedicinepatents.

Thepressureon priceswill be broughtaboutthroughtheindependentreviewof anynegativedecisionsby thePharmaceuticalBenefitsAdvisory Committee(PBAC);increasedtransparencyofthePBAC processeswithout acorrespondingimprovementintransparencyofinformationfrom manufacturers;anopportunityfor pharmaceutical


manufacturersto apply for an adjustmentto PBSpricesandtheestablishmentof amedicinesworking groupofeachcountry’sofficials.

7.3 In theUSA, the intellectualproperty(IP) provisionsincludedin theAUSFTA, haveledto the effectiveextensionof pharmaceuticalmonopoliesby delayingandpreventingtheentryof low cost ‘generics’to themarket. PBSdataindicatesthatthepricesofbrandname(patented)drugsfall by an averageofmorethan30 percentafterpatentexpirationandtheentryof genericmedicines. Delaysto theavailability ofgenericpharmaceuticalswill thereforesignificantly increasepharmaceuticalexpendituresinAustraliaovertime particularlyin hospitalswheregenericbrandsareusedextensively.Additionally, delaysin theavailability of genericswill weakenthePBS referencepricing system,a critical componentof the ‘PBS framework’.

7.4 A rise in medicinecoststhroughthePBSand any delaysin theavailability ofgenericequivalentmedicineswill haveadirect impactuponthecostof medicinespurchasedbythepublic sector. Medicinesarethesecondmostexpensiveitem aftersalariesin thehealthbudgetandasmall increasein costsin additionto the implementationofnewmedicinesin themarketwill haveasignificantimpactuponthehealthbudget.

7.5 RegulatorycooperationbetweentheUnitedStatesFoodandDrug Administration(FDA) andAustralia’s TherapeuticGoodsAdministration(TGA) is of no directconcern.Improvedcooperationbetweentheregulatoryauthoritieswill assistpharmaceuticalmanufacturersin registeringtheirproductsin theUS andAustralianmarkets.Therearealsopotentialbenefitsfor consumersin situationswhereamedicinehasasmall marketin Australiadue to limited indicationsfor use. Currently,it maynotbe economicalfor themanufacturerto apply for marketingapprovalfor aparticularindicationor productform (suchasa liquid form for children) in Australia.

A closerrelationshipbetweentheFDA andTGA mayenabletheseproductsto reachtheAustraliamarketin thefuture.

7.6 Theprovisionon disseminationof pharmaceuticalinformationvia theInternetraisessignificantconcernthat thiswill allow Directto ConsumerAdvertising(DTCA) inAustralia. DTCA is legal in theUSA andNewZealandbut not in Australia. It hasbeenassociatedwith asubstantialincreasein usageoftheproductstargeted(andthushealthcarecosts)which areoftennot in accordwith bestpractice.

7.7 Spendingon DTCA in theUS hasgrownrapidly, reachingUS $2.5 billion in 2000.Thereis no evidenceofimproveddrugutilisation,improveddoctor-patientrelations,orreductionsin hospitalisationrates,attributableto DTCA. Theaim oftheprohibitionofprescriptiondrug advertisingis healthprotection. Any changethatwould weakenthecurrentrestrictionson suchadvertisingshouldbe basedon evidencethattherearehealthbenefits. It shouldalsobe notedthat therecentNationalCompetitionReviewofDrugs, PoisonsandControlledSubstancesLegislation(GalballyReview)includedarecommendationthatcurrentadvertisingrestrictionson theadvertisingof prescriptionmedicinesto consumersshould be retained(Recommendation11).


8 INVESTMENT

8.1 WesternAustraliais asubstantialbeneficiaryoftheextensiveUS investmentin itsresourcessector. With thederegulationof local energymarketsandtheincreasedpricecompetitivenessofourenergyinputs,further investmentis expectedto be sourcedfromtheUS.

8.2 Consequently,WesternAustraliasupportsthe liberalisationof investmentrestrictionsby UnitedStatesbusinessundertheAUSFTA, butnotesthatthis is likely to haveminimal impacton UnitedStatesinvestmentin WesternAustralia. Althoughthemining industry in WesternAustraliais dependenton significantlevelsof foreigninvestmentfor explorationand infrastructuredevelopment,to ourknowledgetherehasbeenno UnitedStatesforeigninvestmentproposedin WesternAustraliathathasbeenrejectedby theForeignInvestmentReviewBoard.

8.3 WesternAustraliawelcomesthestatementfrom theCommonwealththatAustraliahasretainedtheright to examinesignificantforeigninvestmentproposalsin all sectorstoensuretheydo notraiseissuescontraryto thenationalinterest.

8.4 Giventhe stronginterestof US companiesin the WesternAustralianeconomy,it isreassuringthattheagreementdoesnot includeaprovisionfor investor-statedisputesettlementbutrelieson thecurrentlegal systemfor disputeresolution.

9 TEMPORARY ENTRY OF BUSINESSPEOPLE

9.1 It is disappointingthatno progresswasmadein thenegotiationson thematterof visasandwork permits. It is understoodthatAustraliaandtheUnitedStateshaveagreedtocontinuediscussionon this througha separateprocess.WesternAustralialooksforwardto theresolutionof this matterin thenearfuture.

10 TELECOMMUNICATIONS

10.1 TheprovisionsoftheAUSFTA will assistsmallerAustraliantelecommunicationscompaniesandInternetServiceProvidersby ensuringaccessibilityto, andtheunbundlingandinterconnectionof, telecommunicationsnetworksin theUS. Increasingaccessto the networkswill makeit easierfor smallerAustraliancompaniesto accesstheUS marketsandInternetcontent. On theotherhand,US firms mayfind it easiertoentertheAustralianmarket.

10.2 WesternAustraliais supportiveoftheuniversalserviceobligationsandis pleasedtoseethattheseareendorsedby theagreement.

11 SHIPBUILDING

11.1 Theoutcomefor theshipbuildingindustryis seenasa lost opportunity. Theredo notappearto be significantgainsin respectto accessto theshipbuildingindustry,with onlyship repairsandmaintenancehavingits 50 percenttariff reduced.


11.2 Shipbuilding is asignificantandgrowingindustryin WesternAustraliaandits fastferry industryis regardedasa world leader.RemovaloftheJonesAct relatedrestrictionswould haveallowedtheindustryto sell WesternAustralianmanufacturedboatsdirectly into theUnitedStatesmarket. ThecontinuationoftheUS prohibitionontheimport ofany boatsfor US domesticuseundertheJonesAct is disappointingandlimits furthergrowthpotential.

12 GOVERNMENTPROCUREMENT

12.1 OpeningtheUS governmentprocurementmarketis an advantageto WesternAustraliangoodsandservicescompaniesasit providesanopportunitythat did notpreviouslyexist. In reality,however,mostWesternAustralianbusinessesmayhavelimitedcapacityandsustainabilityto bid in theUS governmentprocurementmarket.

12.2 DuringOctober2003,the WesternAustralianGovernmentgavewithoutprejudiceagreementto its governmentprocurementmarketbeingincludedin thenegotiationsfortheAUSFTA. ThePrimeMinisterhasrecentlywritten to thePremierof WesternAustraliaseekingWesternAustralia’sfinal decisionon theinclusionof its governmentprocurementmarketin theAUSFTA. He also requestedthattheWesternAustralianGovernmentreconsiderits reservationon preferencesorrestrictionsassociatedwithprogramspromotingregionaldevelopment.At thetime ofwriting theGovernmentwasconsideringtheserequests.

13 CULTURE AND THE ARTS

13.1 WesternAustraliawelcomesopportunitiesto developtradeand investmentlinks in thecultureandthearts sectorwith theUS, but is stronglyopposedto settingcontentandquotaregulationsthatrestrictAustralia’sability to makeimportantdecisionsaboutitsownculture. In thewordsof RichardLetts, ExecutiveDirector oftheMusic Council,It is inappropriatethatAustraliancultural decisionsshouldbe madenotaccordingtoour own cultural assessments,but to conformto UStrade objectives.Themainconcernswith theAUSETA arein relationto thelow quotasset for local productonsubscriptiontelevisionandwith Article 16.4, relatingto non-discriminatorytreatmentofdigital products.

13.2 ThroughScreenWestand ArtsWA theWA Governmenthascommittedto supportingthedevelopmentof theWesternAustralianfilm, theatre,televisionandcontemporarymusicindustries. It is pleasingthattheAUSFTA will noterodethe StateGovernment’scapacityto supportthearts andcultural sectorthroughgrants,subsidiesandtaxincentives. However,theAUSETA is likely to affectthemarketfor culturalproductthroughrestrictinglocal contentregulations.

13.3 While local contentquotason free-to-airtelevisionremainat 55 percent,thecapsonexpenditurefor Pay TV will be the lowestin thedevelopedworld andtakeno accountofthefuturepotentialof subscriptiontelevisionin Australia. Australianproductionscurrentlystruggleto competein themarketagainstsyndicatedAmericanproductionson productioncostsand/oreconomicgrounds.Americanproductionsmostlyrecouptheirproductionexpenditurein theirhomemarketandcanthusbe sold to Australianbroadcastersfor much lessthanAustralianproductions.


13.4 Thelow capson PayTV expenditurehaveimplicationsfor theviability of Australia’sfilm and televisionsectorinto thefuture. TheAUSETA restrictstheability forAustralia,andWesternAustralia,to takeup opportunitiesthatmight emergefrom thegrowthof thePayTV industryto apoint whereit couldafford higherlevelsofexpenditureonAustralianproduct. A largermarketwould assistin developingthefilmand televisionindustry,which wouldenableit to be morecompetitivein theglobalmarket.

13.5 A greatertake-upofPay TV, with low levelsof Australiancontent,alsohasimportantimplicationsfor Australia’sability to maintain its cultural identity. Australianeedstoretainits right to ensurelocal voicesareheardandlocal storiesaretold on its mostpopularbroadcastingmediums. TheAUSFTA shouldtakeintoaccountthepotentialgrowthof subscriptiontelevisionin Australia.

13.6 Broadcastingregulationsarea responsibilityof theCommonwealthGovernment.TheAUSFTA will affectWesternAustraliain thesameway thatit affectstherestof theAustralianindependentproductionsector. If thereis no increasein productionexpenditureby PayTV, therewill be no correspondingopportunityto attractthisexpenditureto WA.

13.7 Therehasbeenlittle investigationof opportunitiesfor thesectorasaresultof theAUSFTA. This is becausethesectorhasbeenconcentratingon combatingtheperceivedthreatof restrictedlocal contentregulations. If theAUSFTA limits theability to get local storiesproduced,thenAustraliawill havelimited productavailableandthusreducedability to competein the internationalmarket. In any case,thebalanceoftradein audiovisualproduceis so far in theUS’ favourthatthis imbalanceisunlikely to be affectedby theAUSFTA.

13.8 Article 16.4: Non-DiscriminatoryTreatmentof Digital Productsrequirescloseexamination.Currentlyit appearsthatthereareno restrictionson digital productoutsidetheaudio-visualandbroadcastingsector. This mayhaveimplicationsfor onlinepublishingandotherpartsofthe industrydealingwith digital media.

13.9 SeeAttachmentA for a summaryofindustryconcernsthat havebeenbroughtto theattentionof theWA Government.

14 LABOUR

14.1 WesternAustraliais ofthe opinionthatthereareatleasttwo key areasin whichtheCommonwealthGovernmentis arguablyin breachofthespirit andintent of theLabourChapterof theAUSFTA. Theseare:

a) Article 18.1,Statementof SharedCommitment,basedon thedemonstratedability of the WorkplaceRelationsAct1996(Cth) (WR Act) in practicetounderminetheinternationallyacceptedrightof workersto bargaincollectively; and

b) Article 18.3,ProceduralGuaranteesand PublicAwareness,dueto theinability of employeesto seekremediesfor apparentadministrativedeficienciesin theapplicationof theno disadvantagetestwith respectto theregistrationof certainAustralianWorkplaceAgreements(AWAs).


14.2 In addition, it is clearlyarguablethat theCommonwealthis failing to effectivelyenforceits labourlawsin thespecificcaseof theno disadvantagetestfor AWAs.However,dueto thecaveatattachedto Article 18.2,ApplicationandEnforcementofLabourLaws,thecasefor abreachofthis Article is moredifficult to makeoutat thepresenttime.

14.3 Thereasonsfor thesestatementsaredetailedin AttachmentB ofthis submission.

15 SERVICESAND INVESTMENT

15.1 WesternAustraliawelcomestheopportunitiesthatmaybecomeavailablefor WesternAustralianserviceprovidersundertheAUSFTA.

15.2 WesternAustraliaconsidersit essentialthatthesovereignpowerofthe WesternAustralianParliamentto legislateto protectthehealthandsafetyofits citizensandtoprotectits naturalresourcesis not eroded.For example,it is essentialthattheStatehastheability to regulatewaterresourceusein thefuture.

15.3 WesternAustraliawelcomestheassurancefrom the PrimeMinister thatAustraliahasretainedtheright to regulatein areasincluding healthandtheenvironment.However,webelievethis needsfurtherdiscussionandanalysisaspartof theJSCOTprocess.

15.4 EnvironmentIt is understoodthat provisionsin theInvestmentChaptermeanthatchangesto licencesto takewaterdo notconstituteexpropriation,subjectto thechangesbeingmadein anon-discriminatoryway (seeAnnex 11-B, clause4(b)). In WesternAustraliatheselicencesareissuedundersectionSCof theRightsin WaterandIrrigation ActandtheAct providesfor theiramendmenton anumberof grounds,only someofwhich arecompensable.

Thescenariosetout in Article 19.1 callingfor jurisdictionsto strive to continuetoimprove their levelsofenvironmentalprotection,is stronglysupported.

15.5 Cross-BorderTradein Servicesand Investment

Gambling,bettingandalcohol: It is notedthatthereis no reservationfor gamblingandbettingin AnnexII oftheagreementandno referenceto nationaltreatmentandlocalpresencein relationto alcoholin Annex11-10. Advice from theDepartmentof ForeignAffairs andTradeindicatesthattheseissuesareaddressedin a sideletter to theagreement.GivenWesternAustralia’srequestfor an AnnexII reservationin theseareas,informationfrom theCommonwealthon what, if any, implicationstheremovalof thesereservationsmayhavefor WesternAustraliawill be welcome.

Social Services:It is notedthatthereis no referenceto public utilities andpublictransportin relationto socialservicesin Annex11-5 oftheagreement.Informationonany implicationsoftheomissionoftheseserviceswill be welcome.


16 CONSULTATION WITH THE STATES AND TERRITORIES

16.1 Theconsultationprocesswith theStatesandTerritoriesorganisedby theDepartmentofForeignAffairs andTradeis acknowledgedandappreciated.This processincludedbriefing sessionsbeforeandafterthemajorityof theroundsof negotiationsandtheprovisionof anumberof paperson variousaspectsof theservicesand investmentchaptersof theAUSFTA.

16.2 Therewere,however,a numberofdifficulties with theconsultationprocessthatcouldbe avoidedfor future consultations.

16.3 With respectto StateandTerritory representationat thenegotiations,it wasdisappointingthattherepresentativenominatedbeforethethird roundofdiscussionswasinformedat the lastmomentthathe couldnot attend. It is suggestedthat in futureit is madeclearto theotherpartyattheoutsetthatAustraliawill haveat leastonerepresentativeof theStatesand Territorieson theAustraliannegotiatingteam.

16.4 TheNationalInterestAnalysis statesthat:

The Statesand Territories...participatedclosely.. . in ensuringtheappropriateframingofreservationsto the Cross-BorderTradein ServicesandInvestmentChapters.

While theStatesandTerritorieswereaskedto providetheir inputinto Australia’sAnnexII list (in earlyJanuary),it is disappointingtheywerenotkept informedof theresultsofthenegotiationsin thearea,evenwhentheyspecifically askedtheCommonwealthfor informationduringa teleconferenceaftertheagreementwasannounced.ConsequentlyWesternAustraliawasnot awarethatthereservationsit hadrequested,and informedby telephonewould be coveredby Commonwealthreservations,werenot in thefinal AnnexII list until thedrafttextwasmadepublic.

It is suggestedthatin future theStatesandTerritoriesbe kept informedofdevelopmentsduringthefinal negotiationsassoonasis practicable.

16.5 It wasdisappointingthat, despiteagreeingto do so,theCommonwealthdid notprovidethe StatesandTerritorieswith informationon theoutcomesofthenegotiationsorthedrafttext beforetheseweremadepublic.

While it is recognisedthatthereareprotocolsto be observedduringnegotiations,it isrecommendedthat Stateand Territory Governmentsbe kept informedof progress,particularlyon areasthat affectthem,duringthefinal stagesofthenegotiations.


ATTACHMENT A


CULTURE AND THE ARTS

Summary of industry concernsbought to the attention of the Western AustralianGovernment

• The immediateimpactof theAUSFTA is not the issuesomuchasconcernsthatwehavenot future-proofedAustraliancontentandtheproductionindustry.

• TheScreenProducersAssociationof Australia(SPAA) hasstatedthatthecapsonAustraliancontentwill be the lowestin thedevelopedworld undertheFTA.

• PayTV serviceswill only haveto spend10 percentoftheirproductionbudgeton localcontent,andthis quotaonly appliesto servicesprovidingarts,children’s,documentary,dramaandeducationalshows. It is well knownthatan expenditurebudgetof 10 percentresultsin significantly lessthan 10 percentof total transmissiontime. SPAA hasstatedthattheactualtransmissiontimeis 3.8 percent. (Theexisting 10 percentlevel wassetinrecognitionthat local contentis veryexpensivecomparedwith foreignproductandahigherlevel would havebeenprohibitive to gettingPayTV startedin Australia.)

• ShouldtheCommonwealthGovernmenteverwishto increasethe 10 percentlocal contentquotaon subscriptiontelevision,it is only ableto do so with respectto dramachannels,and only to a maximumof 20 per cent. To increasethe level on dramachannels,Australiawill needto consultwith ‘affectedparties’ in theUnitedStates. Theseconsultationsarelikely to be organisedby powerful organisationssuchastheMotion PictureAssociationofAmerica(MPAA), which hasexpressedpublic andstridentoppositionto Australia’slocalcontentquotas.

• Thecurrentlevel of 55 percentAustraliancontenton free-to-airhasbeenmaintainedintheAUSFTA. HowevertheCommonwealthGovernmenthasforfeitedits right to increasethis quotato takeinto accountchangingcircumstances.(It shouldbe notedhowever,thatfree-to-airbroadcastersfrequentlyexceedthecurrent55 percentquota.)

• Thereis no provisionto regulateB-cinema,whichmaybe an importantmethodofdistributingfilms in thefuture.Currently,thereis no regulationoflocal contentinAustraliancinemas.However,shouldcinemausagechangein a significantway, forexamplecinemasbecomingavenuefor watchingbroadcasts,imposinglocal contentregulationsmaybecomedesirable.

• Article 16.4(Non-DiscriminatoryTreatmentof Digital Products)will needto be examinedcarefully for its potentialto impacton areasoutsideoftheaudio-visualandbroadcastingsectors.Therecouldbe adetrimentalimpactfor Australianpublishersif Article 16.4negatescurrentlegislationdesignedto protectAustralianpublishersfrom thelargerUSmarket. CurrentlegislationpreventsUS publisherssellinga title by an Australianauthorin Australia,whilst thattitle is still in print in Australia.

• It maybe that therewill be implicationsfor US productionsbeingfilmed in Australiawithrespectto adoptionof US industrialregulations. This subjectrequiresfurtherinvestigation. H


ATTACHMENT B


LABOUR

Potential Breachesof the Labour Chapter ofthe AUSFTA

Chapter 18 oftheAUSFTA (theLabourChapter)consistsofeight articlesincludingStatementof SharedCommitment(18.1),ApplicationandEnforcementof LabourLaws (18.2),ProceduralGuaranteesandPublicAwareness(18.3), InstitutionalArrangements(18.4),LabourCooperation(18.5),LabourConsultations(18.6),InternationallyRecognisedLabourPrinciplesandRights(18.7)andScope(18.8).

2. Basedon thedraft text of theLabourChapter,WesternAustraliahasidentifiedanumberof potentialbreachesoftheAUSFTA, largely relatedto theoperationofthe WorkplaceRelationsAct1996(Cth) (WR Act) in practice. Suchbreachesareprobablybestdescribedas breachesof theapparentspirit andintent oftheLabourChapterratherthanactualdirect breaches.

3. Thefollowing outlinesthesepotentialbreaches:

a) Statementof SharedCommitment— Article 18.1:

1. Paragraph1 ofArticle 18.1 states— Thepartiesreaffirm theirobligationsasmembersoftheInternationalLabor Organization(IL 0) andtheir commitmentsundertheILO DeclarationonFundamentalPrinciplesandRightsat Workand its Follow-up(1998). EachPartyshall striveto ensurethatsuchlabourprinciplesandtheinternationallyrecognizedlabourprinciplesandrightssetforth in Article 18. 7 are recognizedandprotectedby domesticlaw. 2

ii. Oneof the ‘internationallyrecognizedlabourprinciplesandrights’listed at Article 18.7 is theright to organiseandbargaincollectively.Theability for employersto engageemployeeson theconditionthattheyenterinto an AustralianWorkplaceAgreement(AWA), whichhasbeenestablishedasaprinciple throughtheoperationof theWRAct in practice,arguablyunderminesthisinternationallyrecognisedlabourprinciple. Thatis, whereemployeesareforcedinto individualagreementstheyhavearguablylost theability to bargaincollectivelyundertheWR Act.

in. In WA’s view this is a clearbreachof thespirit and intent oftheLabourChapter.

V

2 AUSFTA Draft [1 March2004] Chapter18—Labour--Article 18.1(1)


iv. This view is reinforcedby pastobservationsoftheCommitteeofExperts(COB) of theILO. For examplein 1998theCOB statedsomejob positionsarebeingdesignatedas ‘Australian WorkplaceAgreement(A WA) only‘positions, with no real opportunityfor theworkersto havetheir termsandconditionsofemploymentgovernedby a collectiveagreement.In theviewoftheCommittee,suchsituationscouldamountto anti-uniondiscrimination, contrarytoArticle], andcouldnotbe saidto encourageandpromotevoluntarycollectivebargaining, contrary to Article 4. TheCommittee,therefore,requeststhe Governmentto indicate in its nextreport anystepstakento ensurethat undertheActasappliedin practice,workerscannotbe discriminatedagainstfor seekingto havetheirtermsandconditionsdeterminedthroughcollectivebargaining. TheCommitteealso requeststheGovernmentto commenton thequestionofwhethertheAct, in practice, resultsin theeffectivediscouragementofcollectivebargaining.

v. This issuewasagainpursuedby theILO COB in 2000. [Alccordingto theCommitteeofExpertsseveralprovisionsofthe1996FederalWorkplaceRelationsActcalled intoquestiontheapplicationofArticles] and4 ofthe Conventionby excludingcertain categoriesofworkersfrom thescopeofthe legislationandlimiting thescopeoftrade union activitiescoveredbytheprovisionsconcerninganti-union discrimination,aswell asgivingprimacyto individualcontractsovercollectiverelationsthroughtheAustralianWorkplaceAgreementsprocedure. ~

b) ApplicationandEnforcementofLabourLaws— Article 18.2:

vi. Importantly,this Article containstheprincipalcaveatlimiting thescopeofeachparty’s obligationsregardingtheenforcementof itslabourlaws. Thatis, [alparty shallnotfail to effectivelyenforceitslabour laws, through a sustainedor recurringcourseofaction orinaction, in a manneraffectingtradebetweentheparties,after thedateofentry intoforceofthisAgreement(emphasisadded).

vii. Whilst it is clearlyarguablethat theCommonwealthis failing toeffectively enforceits labourlawsin thespecificcaseofthenodisadvantagetestfor AWAs, it would presumablyhaveto bedemonstratedby theGovernmentoftheUSA thattheCommonwealthofAustraliais doing so in a manneraffectingtradebetweentheparties.Thatis, to encouragetrade or investmentbyweakeningor reducingtheprotectionsaffordedin their respectivelabour laws. 6

ILCCR: Examinationof individual caseconcerningConventionNo. 98, Right to Organiseand CollectiveBargaining,1949Australia(ratification: 1973)Published:1998“4 ILCCR: Examinationof individual caseconcerningConventionNo. 98, Rightto OrganiseandCollectiveBargaining,1949Australia(ratification: 1973)Published:2000~Ibid — 18.2(1)(a)6 Ibid — 18.2(2)


viii. TheCommonwealth’s‘Guide to theAgreement’emphasisesthiscaveatalongwith thefactthat only thegovernmentofeachpartycanbringan actionfor breachof this sectionvia theAUSFTA’s disputesettlementprocedure(DSP).

ix. Penaltiescanissueasaresultof suchDSP determinationsin theform ofafine ofup to $USJSmillion perannum(adjustedforinflation) to bepaidbytheParty complainedagainstinto a fund, tobe spentat thedirectionofthepartieson appropriatelabourinitiatives in the territory ofthatParty. ‘~

x. However,shouldAWAs thatare registeredbasedon a flawedinterpretationoftheno disadvantagetestincreasein numbers,thecasecouldbe madethatAustraliais gainingacompetitiveadvantagethroughreducedlabourcostsin directviolation ofArticle 18.2.

c) ProceduralGuaranteesandPublicAwareness— Article 18.3:

xi. On facevalueit appearsthe intent ofthis Article is to ensurethatworkersandemployersin generalwill continueto havefair,equitableandtransparentaccessto labourtribunalsand/orcourts.

xii. TheArticle providesthat[ejach Partyshallensurethatpersons(personsbeingdefinedasnaturalpersonsorenterprises)with alegally recognizedinterestunderits law in a particularmatterhaveappropriateaccessto administrative,quasi-judicial,judicial orlabour tribunalsfor theenforcementoftheParty‘s labour laws. 8

xiii. It compelseachPartyto ensurethat its administrative,quasi-judicial, judicial, or labour tribunalproceedingsfor theenforcementof its labour laws arefair, equitableandtransparent”andprovidesfurtherthat[e]ach Partyshallprovidethat thepartiesto suchproceedingsmayseekremediesto ensuretheenforcementofrightsunderits labour laws. ~

xiv. Whilst theCommonwealthwould likely arguethatit is compliantwith this requirement,it is arguablethattheOffice theEmploymentAdvocate’spolicy regardingtheapplicationof theno disadvantagetestto certainAWA provisions(suchasso called‘voluntaryovertime’provisions)representsafailure to comply with this

Article, at leastin spirit.

‘a

AUSFTA — Guide to the Agreement— Chapter18 — Labourpg 110

8 AUSFTA Draft [1 March 2004] Chapter18—Labour—Article18.3(1)

~Ibid 18.3(2) and (3)


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