by Richard Denniss
[Originally published in the Australian Financial Review, 30 October 2019]
After decades of pursuing free trade at the expense of local jobs, the conservatives in the Coalition — aping Donald Trump and Boris Johnson — have decided to pivot to populism. Gone is the rhetoric of Alexander Downer and Julie Bishop about how Australia benefits from a global system of rules. Scott Morrison recently declared sovereign nations need to eschew an “unaccountable internationalist bureaucracy” and “negative globalism”.
It’s not just international bureaucrats the Prime Minister is keen to avoid. At Senate estimates last week, Department of Foreign Affairs and Trade secretary Frances Adamson revealed that neither she nor her department of 6,078 staff were consulted before Morrison announced his new approach to foreign policy. Nor was DFAT consulted about the Prime Minister’s decision to redefine China’s status as a “newly developed nation”. The Morrison government incurs all the costs of a sizeable bureaucracy and seeks none of its benefits.
Had the Prime Minister consulted those with a bit more experience in foreign policy than himself, which is pretty much everyone at DFAT, he might have been cautioned against criticising the creation of international bureaucracies when he was just about to sign up to a few more.
While Morrison’s new talking points suggest there should be no higher power than the Australian people, his government is in the middle of negotiating free trade agreements with Indonesia and Hong Kong – agreements that include provisions for foreign investors to sue the Australian government if our Parliament changes laws in ways the investors do not like.
So-called investor state dispute settlement (ISDS) clauses give foreign trade dispute tribunals — otherwise known as “unaccountable internationalist bureaucracies” — the power to compel Australian governments to compensate foreign companies that feel aggrieved by decisions of the Australian Parliament. Such powers are not even available to Australian companies.
Companies, Australian and foreign owned, already have the right to seek compensation “on just terms” via the High Court of Australia, if they believe their property has been appropriated by Commonwealth. So why would Morrison subjugate the pre-eminence of our High Court and our Parliament to a tribunal of international bureaucrats?
There is nothing hypothetical about the dangers that ISDS clauses, agreed to by the Prime Minister, pose to Australian sovereignty. While British American Tobacco may have failed in its efforts to use an ISDS clause to overturn the Australian Parliament’s plain-packaging legislation for cigarettes, the case provides a clear example of the risks attached to extrajudicial dispute resolution mechanisms.
What if a foreign oil company were to sue the Australian government for introducing fuel efficiency standards for our passenger vehicles? What if a foreign company sued us for reining in the power of the social media giants? Should the Australian Parliament and constitution provide the last word on such questions? Or a faceless trade bureaucrat in Geneva? Conservatives used to have a clear answer to such questions of sovereignty.
So-called free trade agreements don’t create “free trade” between nations, they simply spell out all the restrictions on trade that both countries are happy to retain. Australia’s 1,400-page FTA with the US doesn’t allow Australian consumers to pay US prices on the websites of American companies. We can’t import cheap US music or television, and Americans can’t import our cheap medicines.
Proponents talk up the benefits of the new trade “freedoms” without dwelling on the restrictions that remain in place or the new restrictions that have been agreed to.
Put simply, in order to make it easier for Australian farmers to export more of their products, trade agreements with Hong Kong and Indonesia will require the rest of us to give up a bit more sovereignty.
The logic of these trade deals has always been that they help to grow the economy and, while some workers might be hurt in the short term, in the long run everyone will be better off.
But the idea that, in order to protect Australian citizens, we must sign up to ISDS clauses that protect the rights of foreign investors that impose harm on our community is absurd.
Almost as absurd as Morrison pretending to be a populist nationalist while handing more power to an “unaccountable internationalist bureaucracy”.
No wonder he doesn’t talk to DFAT before he gives his big foreign policy speeches. As Tony Abbott taught us, captain’s calls don’t need consultation.
Richard Denniss is chief economist at independent think tank The Australia Institute @RDNS_TAI
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