Proof Committee Hansard

COMMONWEALTH OF AUSTRALIA
Proof Committee Hansard
JOINT STANDING COMMITTEE ON TREATIES
Air Sevices—Bahrain; Air Services—Kuwait; Convention on Choice of Courts—
accession; and GATT Schedule of Concessions—amendment
(Public)
MONDAY, 10 OCTOBER 2016
CANBERRA
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JOINT STANDING COMMITTEE ON TREATIES
Monday, 10 October 2016
Members in attendance: Senators Back, Hanson-Young, Ian Macdonald, McAllister and Mr Crewther, Ms
Madeleine King, Ms Marino, Mr Robert, Ms Templeman, Mr Vasta, Mr Wallace.
Terms of Reference for the Inquiry:
To inquire into and report on:
Protocol to Amend and Supplement the Agreement between the Government of Australia and the Government of
the State of Bahrain relating to Air Services (Bahrain, 8 June 2014)
Air Services Agreement between the Government of Australia and the Government of the State of Kuwait
(Antalya, 22 October 2015)
Australia's Accession to the Convention on Choice of Court Agreements (The Hague, 30 June 2005)
Amendment of Australia's Schedule of Concessions under the General Agreement on Tariffs and Trade 1994
(GATT) and the Marrakesh Agreement establishing the World Trade Organization for Implementation of:
Ministerial Declaration on the Expansion of Trade in Information Technology Products (Nairobi, 16 December
2015) and Ministerial Decision - Export Competition (Nairobi, 19 December 2015)

WITNESSES
BRINK, Ms Tegan, Assistant Secretary, Goods and Investment Branch, Department of Foreign
Affairs and Trade .............................................................................................................................................. 12
EMERSON-ELLIOTT, Mr Richard, Director, Agriculture Policy and Negotiations Section,
Department of Foreign Affairs and Trade ...................................................................................................... 12
McCLINTOCK, Ms Jane, Acting Assistant Secretary, Trade and Customs Branch, Department of
Immigration and Border Protection ................................................................................................................ 12
NEWNHAM, Mr Simon, Assistant Secretary, Agriculture and Food Branch, Office of Trade
Negotiations, Department of Foreign Affairs and Trade ............................................................................... 12
REDMOND, Ms Ann, Acting General Manager, Aviation Industry Policy Branch, Department of
Infrastructure and Regional Development ........................................................................................................ 1
ROSS, Mr Paul, Assistant Secretary, Bilateral Engagement and Trade Policy Branch, Trade
and Market Access Division, Department of Agriculture and Water Resources ........................................ 12
SMITH, Mr Glenn, Policy Officer, International Air Transport Section, Department of
Infrastructure and Regional Development ........................................................................................................ 1
TWISK, Mr Simon, Director, Industrials and Market Access Section, Office of Trade Negotiations,
Department of Foreign Affairs and Trade ...................................................................................................... 12
VASENSZKY, Ms Sophie, Senior Legal Officer, Attorney-General’s Department .......................................... 1
VASENSZKY, Ms Sophie, Senior Legal Officer, Attorney-General's Department .......................................... 4
WALTER, Mr Andrew, Assistant Secretary, Attorney-General’s Department ................................................ 1
WALTER, Mr Andrew, Assistant Secretary, Attorney-General's Department ................................................ 4
WILSON, Mr Scott, Manager, Trade Policy Division, Department of Industry,
Innovation and Science...................................................................................................................................... 12

Monday, 10 October 2016 JOINT Page 1
REDMOND, Ms Ann, Acting General Manager, Aviation Industry Policy Branch, Department of
Infrastructure and Regional Development
SMITH, Mr Glenn, Policy Officer, International Air Transport Section, Department of Infrastructure and
Regional Development
VASENSZKY, Ms Sophie, Senior Legal Officer, Attorney-General’s Department
WALTER, Mr Andrew, Assistant Secretary, Attorney-General’s Department
Committee met at 11:31
Air Services—Bahrain; Air Services—Kuwait
CHAIR (Mr Robert): I declare open the public hearing of the Joint Standing Committee on Treaties. These
are public proceedings, although the committee may agree to a request to have evidence heard in camera or may
determine that certain evidence should be heard in camera. I remind all witnesses that in giving evidence to the
committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a
witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt.
It is also a contempt to give false or misleading evidence to a committee. If a witness objects to answering a
question, the witness should state the ground upon which the objection is taken, and the committee will determine
whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to
insist on an answer, a witness may request that the answer be given in camera. Such a request may, of course, also
be made at another time.
For Commonwealth or state officers and for those new on this committee, I draw particular attention to an
order of the Senate from 13 May 2009, specifying the process by which a claim of public interest immunity could
be raised. Copies are available from the secretariat. The Senate also resolved that an officer of a department of the
Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given a
reasonable opportunity to refer questions asked of that officer to superior officers or to a minister. This resolution
prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for
explanations of policy or factual questions about when and how policies were adopted.
In accordance with the committee's resolution of 12 September 2016, this hearing will be broadcast on the
parliament's website and the proof and official transcripts of proceedings will be published on the parliament's
website. Those present here today are advised that filming and recording are permitted during the hearing. I also
remind members of the media who may be present or indeed listening on the web of the need to fairly and
accurately report the proceedings of the committee.
The committee will now take evidence on the air services agreement between the government of Australia and
the government of the state of Kuwait and the protocol to amend and supplement the agreement between the
government of Australia and the government of the state of Bahrain relating to air services.
I now welcome representatives of the Department of Infrastructure and Regional Development to give
evidence today. While the committee does not require you to give evidence under oath, I should advise you that
this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the
respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a
contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary
privilege. I now invite you to make a brief opening statement before we proceed to a wider discussion.
Ms Redmond: We welcome the opportunity to present on the two air services arrangements. Air services
agreements are negotiated to permit and facilitate the operation and development of international air services
between countries. Under the framework of the Chicago convention of 1944, which provides an overarching civil
aviation framework, international airlines cannot service a market between two countries without an air services
agreement.
The proposed treaty agreement with Kuwait will provide a binding legal framework to support the operation of
air services between Australia and Kuwait. The agreement will be implemented through an existing framework of
legislation, including the Air Navigation Act 1920, the Civil Aviation Act 1988 and the International Air Services
Commission Act 1992. There will be no direct financial cost to the Australian government or to any state or
territory governments associated with its implementation.
The proposed agreement will establish for the first time a treaty-level air services agreement between Australia
and Kuwait which, in conjunction with existing commercial entitlements, will allow airlines of both countries to
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Page 2 House of Representatives Monday, 10 October 2016
continue to develop international air services between our two countries. Australian business and Australian
travellers will benefit from our airlines having continued access to the Kuwait market.
The proposed agreement obliges the governments of Australia and Kuwait to allow the designated airlines of
each country to operate services between the two countries in accordance with the limitations settled between
aeronautical authorities and subject to compliance with applicable laws, including safety, security, competition
laws, customs and quarantine. Comprehensive stakeholder consultation also took place prior to negotiation.
The proposed protocol between Australia and Bahrain makes minor amendments to the Australia-Bahrain air
services agreement that entered into force in 1995. The protocol proposes more liberal route rights and tariff
provisions for both countries and changes references to 'the State of Bahrain' to 'the Kingdom of Bahrain'.
In both cases, the treaty actions were settled in conjunction with an arrangement of less than treaty status in the
form of a memorandum of understanding. The memorandum of understanding with Kuwait was signed in April
2012 and that with Bahrain in March 2003. In accordance with both Australian and accepted international
practices, these MOUs settled more detailed commercial entitlements that defined the scope of airlines' operations
under the respective air services agreements and applied the provisions of the proposed respective treaty action on
an administrative, non-legally-binding basis pending entry into force. MOUs are, by custom, confidential between
aeronautical authorities and are not distributed publicly. We have provided a copy of the MOUs with Kuwait and
Bahrain to the committee to aid in consideration of the proposed treaty action.
I would be happy to take any questions the committee may have on the proposed agreement with Kuwait and
the proposed protocol with Bahrain.
CHAIR: Thank you, Ms Redmond. Is the proposed agreement with Kuwait different in any way from any
previous air services agreements between the government of Australia and governments of other states?
Ms Redmond: The agreement with Kuwait was based on Kuwait's text, which differs slightly from the
Australian model text. However, it is consistent with our model text.
CHAIR: What are the substantive differences?
Mr Smith: The main differences between Kuwait's model text, which we worked off during the negotiations,
and many of our other arrangements, including what we use as our model text—substantively they provide for the
same legal rights and obligations to airlines and upon parties—would be in terms of how they are structured and
the exact wording used to create those obligations.
CHAIR: In terms of the Protocol to Amend and Supplement the Agreement between the Government of
Australia and the Government of the State of Bahrain relating to Air Services, again, are there any substantive
differences between the protocol we are moving into and other similar agreements?
Mr Smith: The protocol itself does not create any kind of additional obligations. The provisions around tariffs
that were included in that protocol are consistent with what we usually look to negotiate, and they provide for free
pricing for airlines to determine their own airfares for carriage of passengers and cargo, which is consistent with
our standard approach. The other substantive amendment to that is just to change references to 'the State of
Bahrain' to 'the Kingdom of Bahrain', which we can support as well.
Senator IAN MACDONALD: This will facilitate airline traffic between Australia and the two nations that
we are dealing with?
Ms Redmond: That is right.
Senator IAN MACDONALD: Do you have figures on the airline traffic between Kuwait and Bahrain and
Australia and whether it is just through traffic or Bahrain and Kuwait are the destinations?
Ms Redmond: Yes, we do have some figures on that. There is no own operated services that operate, so
Qantas would be codesharing with Emirates through Dubai to Kuwait and to Bahrain. Similarly, Virgin Australia
codeshare with Etihad. I think Etihad only services the Kuwait market from Australia. Actual figures for Kuwait,
for example, are 5,410 visitor arrivals in Australia—
Senator IAN MACDONALD: From Kuwait?
Ms Redmond: from Kuwait this financial year.
Senator IAN MACDONALD: And Bahrain?
Ms Redmond: From Bahrain we had 1,495.
Senator IAN MACDONALD: So they are inbound. Do any of their airlines fly direct to Australia?
Ms Redmond: No.
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Monday, 10 October 2016 JOINT Page 3
Senator IAN MACDONALD: So what is the purpose of our agreement with them? Why don't we just use
Etihad or Emirates slots or whatever the purpose of these agreements is?
Ms Redmond: For Australian airlines to be able to service that market, they need to do that through a
codeshare arrangement. The MOU under the air services agreement sets up that codeshare agreement.
Senator IAN MACDONALD: But, if we did not have this agreement, would it make any difference?
Ms Redmond: It would not be as streamlined. I will let Glenn talk to that.
Mr Smith: The way we have gone about it in this case is that, yes, we have needed to do a full treaty-level
agreement in order to facilitate codeshare arrangements by our airlines. That has been the process that some
countries have wanted to take with us.
Senator IAN MACDONALD: So is this done at the request of Bahrain and Kuwait?
Mr Smith: Yes, that is the case in both cases.
Senator IAN MACDONALD: I have limited understanding of these things but, if a Kuwaiti wanted to get to
Australia, they fly one of the Middle East airlines to the hub and then fly on, but that does not need an
international agreement between Australia and Kuwait and Bahrain.
Ms Redmond: In order for them to sell a ticket to Australia—that is, a seamless travel experience for the
consumer—it would need that agreement.
Senator IAN MACDONALD: So you are saying that, if I am a Kuwaiti citizen in the capital of Kuwait,
which is Kuwait City, and I wanted to go to Australia, I could not just front up to the Emirates office—or Etihad
or Air Qatar or whatever—and say, 'I want a ticket to Australia.' You are saying that, without this agreement, it
becomes a more problematic and more difficult exercise?
Mr Smith: It does not necessarily make it more difficult for people to travel between Kuwait and Australia.
This allows Australian airlines to sell a ticket to Kuwait themselves. If you wanted to travel on, say, a QF coded
ticket, this would allow Qantas to sell a ticket from Australia through, which can open up their network and
increase their reach.
Senator IAN MACDONALD: So that is the bottom-line purpose of these agreements. Is that right?
Mr Smith: Yes.
Senator IAN MACDONALD: Which I support.
Ms Redmond: To facilitate trade as well as air.
Senator IAN MACDONALD: And we are very keen to do that, of course. Thank you for that.
CHAIR: It is getting more tourists to the Gold Coast.
Senator IAN MACDONALD: Indeed. I'm sure they would go nowhere else—except north Queensland and
perhaps the Sunshine Coast and perhaps Western Australia!
CHAIR: I can imagine! If there are no more questions, thank you for your attendance here today. If you have
been asked to provide any additional information—and I do not believe you have been—would you please
forward it to the secretary within seven days. You will be sent a copy of the transcript of your evidence and will
have an opportunity to request corrections to transcription errors. Thank you very much.
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Page 4 House of Representatives Monday, 10 October 2016
VASENSZKY, Ms Sophie, Senior Legal Officer, Attorney-General's Department
WALTER, Mr Andrew, Assistant Secretary, Attorney-General's Department
[11:44]
Accession to the Convention on Choice of Courts Agreements.
Although the committee does not require you to give evidence under oath, I should advise you that the hearing is
a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective Houses.
The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament.
The evidence given today will be recorded by Hansard and attracts parliamentary privilege. I now invite you to
make a brief opening statement before we proceed to a wider discussion.
Mr Walter: Thank you, Chair, and good morning everyone. Thank you for the opportunity to provide some
evidence on Australia's proposed accession to the Convention on Choice of Courts Agreements which was
negotiated under the auspices of The Hague Conference on Private International Law. For ease of reference, I will
now just call it the choice of court convention. The objectives of the convention are quite simple: to promote
international trade and investment through enhanced judicial cooperation in civil and commercial matters. The
convention ensures that courts in contracting states exercise jurisdiction consistent with any exclusive choice of
court agreement that exists between the parties to a dispute, and creates a framework for the recognition and
enforcement of judgements arising from such agreements. The convention applies in international cases to
exclusive choice of court agreements concluded in civil and commercial matters where the parties to a contract
have concluded its dispute resolution clause which specifies that a particular court should hear and determine
disputes under the contract.
The proposed convention will impose three key obligations on Australia as a party to the convention:
specifically that an Australian court designated in a choice of court agreement must exercise jurisdiction to decide
the dispute in which the agreement applies; an Australian court not designated in a choice of court agreement
must decline to exercise jurisdiction in the dispute; and judgements given by a foreign court pursuant to a choice
of court agreement made by the parties must be recognised and enforced by an Australian court. So these are the
three core obligations.
The convention provides for certain narrow exceptions and qualifications to these three key obligations to
address situations where the desirability of giving effect to a choice of court agreement might be overridden by
other important considerations—for example, the convention contains safeguards to prevent the recognition of
contractual clauses or the enforcement of foreign judgements that would be contrary to, or incompatible with,
public policy in Australia. This approach strikes an appropriate balance between the core objective of the
convention to enhance the circulation of civil and commercial judgements, and the need for contracting states to
protect their fundamental sovereign rights.
The convention expressly excludes a range of matters from its scope. For present purposes I note that the
convention does not apply to exclusive choice of court agreements to which a consumer is a party or which relates
to a contract of employment. These exclusions recognise the potential power and resource imbalance in such
relationships. I would also like to address a further safeguard which relates to the treatment of damages. The
convention allows a court to refuse the recognition or enforcement of a judgement to the extent that it awards
damages that do not compensate a party for actual loss or harm suffered. This caveat may be relevant where
foreign judgements contain large awards that are exemplary or punitive in nature. In a similar vein the convention
would not require an Australian court to enforce relief awarded in a foreign judgement which is not known under
our domestic law—an example of that is where specific performance of some contracts is not recognised in
Australian law we would not be required to apply that remedy.
Senator BACK: Can you give us an example?
Mr Walter: The specific performance of a personal contract is typically not enforced in Australian law. You
would get damages instead.
Australia's accession to the convention is advantageous for a number of reasons: implementing the convention
will create certainty for Australian and foreign litigants in the conduct of international transactions and will
reduce the risk of unnecessary delays and costs occasioned by parallel proceedings in different jurisdictions, and
where the parties have undertaken to refer a dispute between them to a particular court, they will be held to that
agreement. A further benefit of Australia becoming a party to the convention is that more foreign judgements will
be capable of recognition and enforcement in Australia and, correspondingly, a great number of Australians
judgements will be capable of recognition and enforcement in other contracting states.
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Monday, 10 October 2016 JOINT Page 5
These are positive developments because they will support the choice of parties to litigate in a particular forum
and subsequently have judgements recognised and enforced internationally—wherever the judgement debtor's
assets may be located, for example. This is a particularly important development for Australian plaintiffs, as
currently there are only limited avenues for the recognition and enforcement of the Australian judgements abroad.
We anticipate that the broader circulation of commercial judgements will also raise the profile of cross-border
commercial litigation as an alternative to arbitration. This will ensure stronger competition between these two
dispute resolution mechanisms, which may result in lower costs and better outcomes for litigants in the longer
term.
The government's intention is the convention will be implemented through a new international civil law act,
which will provide clear, consistent and accessible Australian private international law rules and principles to
litigants in Australia and abroad. As we have noted the national interest analysis, this act will also implement the
Hague principles on choice of law in international commercial contracts, which was also approved by the Hague
conference. The principles are not a convention or a treaty, so we are doing that as a matter of clarifying
Australian law.
Generally, existing Australian law produces outcomes that are similar to those that result by the applications of
the rules found in the convention—and the principles, for that matter. I note in particular that exclusive choice of
court agreements are already regarded as enforceable under the common law in Australia, subject to certain
limitations relating to the validity of the agreement and public policy considerations. Australia also has the Trans-
Tasman Proceedings Act, which gives effect to a bilateral agreement with New Zealand, which operates in a
similar fashion as well. Finally, we have the Foreign Judgements Act, which allows for the recognition of foreign
judgements in certain circumstances as well. Just in closing, I would note that Australia played a significant role
in the negotiation of this convention through the Attorney-General's Department and during that process we
consulted with the private sector, with academics and also with the judiciary. We have also done that following
the convention being concluded.
Just for completeness, I would also like to note that currently there is work being undertaken again in the
Hague conference to develop a broad-based convention on the recognition and enforcement of foreign judgements
relating to civil and commercial matters. It is envisioned that this judgements convention will build on the
principles developed in the Choice of Court Convention and create a framework for the recognition and
enforcement of a broad range of civil and commercial judgements. Members of the conference, including
Australia, see this project as a high priority. Formal negotiations commenced in June of this year, and Ms
Vasenszky and my experience was that they were fairly positive in their tone. It is anticipated that that project will
be completed in the next few years.
In conclusion, the implementation of the proposed convention will provide immediate benefits for Australian
individuals and businesses by making the process for determining the forum for litigation in cross-border disputes
more transparent and predictable and by enhancing the recognition and enforcement of the resulting judgements
internationally. I thank the committee for their time and would be happy to take any questions.
Senator BACK: The current parties besides ourselves are the EU, except Denmark; Mexico; Singapore and
the United States. Is that correct?
Mr Walter: The United States has signed but not yet ratified the convention. It is the EU, less Denmark;
Singapore and Mexico at this point.
Senator BACK: The UK exiting the EU would require us to then deal separately with the UK, would it?
Mr Walter: Yes, the result will be that we would have to deal with the UK separately. We already have
arrangements with the UK which allow for pretty easy recognition and enforcement of judgements. It is fairly
straightforward given our similar legal systems. I would imagine the UK will probably sign up to the convention,
though, in the process of exiting the EU.
Senator BACK: So no countries with whom we have recently signed free-trade agreements—China, Japan
and Korea—are signatories and, within the TPP, Mexico would be and Singapore is. Could I ask you: into the
future how, if at all, does this interact with the investor-state dispute settlement process?
Mr Walter: They stand aside from each other; they are not really addressing the same matters. There are other
conventions that applied to investor-state dispute resolution and, in the normal course of events, they would be
governed by the particular trade agreement as a starting point. I would probably have to think that through a little
bit further, but there could be circumstances where a judgement was obtained in a foreign—actually, the investorstate
dispute principles in the relevant agreement will govern that. It will govern where a dispute has to be
resolved between the parties and, then, that would be recognised under normal common law and Foreign
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Page 6 House of Representatives Monday, 10 October 2016
Judgments Act principles, in that instance. I do not think it would be covered by this convention. I will think
about that and get back to you.
Senator BACK: If you could reflect further on that and advise the committee in writing, please. Finally, is
there any incentive or desire or demand that we try to extend this beyond the countries who are currently parties
to the convention?
Mr Walter: As you can see, the convention has only just come into force, with the EU becoming a party.
There is a growing movement, within the Hague conference of parties, looking at actively considering signing up
to the convention. We anticipate that over time the numbers of parties involved will steadily grow.
CHAIR: It seems like it is moving at the speed of an asthmatic ant with a heavy load of shopping, Mr Walter.
It was negotiated and agreed in 2005, and the EU is now just on board; six years after they signed, they have
ratified. These things move slowly in the Hague.
Mr Walter: Yes. Interestingly, I was in the Hague in March—I am Australia's representative to the Council
on General Affairs and Policy, the governing body of the Hague—
CHAIR: How is our ambassador? Is he well?
Mr Walter: He is very well.
CHAIR: Excellent.
Mr Walter: I can vouch for his health at that point. There were some interesting statistics that the Hague
conference had across all its conventions—it has a large number of conventions, about 60-odd—but it is about
eight or nine years from conclusion of agreement to commencement for these instruments. I think the issue, here,
is that it is a significant step for a lot of countries. For the EU, the big issue for them was that they have an
internal regulation that applies within the EU for the recognition and enforcement of judgements between EU
countries, and they want to make sure the two are lined up. For countries like Australia, the issue for us is, largely,
if other countries are not onboard what is the point of us signing up? A few countries fell into that kind of
category. Now there is a bit of momentum and more countries are coming onboard.
CHAIR: Thank you, Mr Walter and Ms Vasenszky, for your evidence today. Brooke Marshall and Mary
Keyes, in their submission, believe that the act will result in more complexity than which currently exists. What is
your view on that statement, and do you agree?
Mr Walter: If I can start, first, with a comment. There are only a small handful of academics in Australia who
really know about private international law, and these are two of them. Ms Marshall is, of course, at the Max
Planck Institute in Hamburg. They are people whose views we take very seriously.
We are, actually, thinking through this very issue. What we will end up with is a range of schemes. The very
narrow is the Trans-Tasman scheme, which we will leave untouched because it provides for a very fluid process
between Australia and New Zealand, reflecting our close ties, legally. We will then have the choice of court
convention. You will then have, going wider again, the Foreign Judgments Act and, going wider again, you will
have the common law.
So, yes, that potentially sets up a whole set of regimes that are broadly consistent with one another but will
have subtle differences. In developing the international civil law act, that is exactly what we are considering—
whether the act itself should cover the field and just set up a clear structure for when you get recognition and
enforcement of judgements, in particular. It is a very valid point and something that we are working through in
the development of the act.
Senator IAN MACDONALD: What is the issue with Denmark?
Mr Walter: That is a good question.
Senator IAN MACDONALD: They think our crowns are linked so they do not need this sort of thing.
Mr Walter: I think that when Denmark became a member of the EU—when you become a member of the EU
you can withhold certain elements that you retain competency for. I think they retained matters relating to their
courts as a competency issue. I think that is the issue, why they are not included in the broad EU proposal. I do
not think they have got anything against choice of court per se. I think it is just that the EU exercises competency
for everyone else but not for Denmark in this particular instance.
Senator IAN MACDONALD: As far as this goes, it seems like a good idea, but what happens in the case of,
particularly, Japan and Singapore, who have been trading partners for years and who have what we would
consider a fairly robust system of justice? That is one question. Perhaps you could just comment on that. What
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Monday, 10 October 2016 JOINT Page 7
happens there if you get a judgement in a document where Australian law applies but you want to enforce it in
Korea? Can you not do that now?
Mr Walter: No, you can. The issue there is whether they provide reciprocity for us or not. So if they
recognise our judgements then we can recognise their judgements under the Foreign Judgments Act as it currently
stands—
Senator IAN MACDONALD: Under the Foreign Judgments Act?
Mr Walter: and there will be certain circumstances in which recognition, particularly as opposed to
enforcement, will be valid in claims that are brought in Australia. They can be led as evidence that proceedings
have already dealt with a particular matter and that perhaps you should just be stopped from bringing the action in
an Australian court. That only relates to the recognition and enforcement element. It is a different question—as I
mentioned, there are kind of these multiple obligations in the convention. Recognition and enforcement is kind of
the pointy end, if you like, but the two earlier ones are that an Australian court must say, 'We're not going to hear
that matter if there is an exclusive choice of court agreement nominating another court'—
Senator IAN MACDONALD: So if a private agreement with a Korean company says, 'Korea's will be the
law applied and the courts applied,' and there is a judgement given, and then action is taken in the Australian
courts, the Australian courts currently could re-hear it, but, under this treaty, if Korea were a—
Mr Walter: They would be stopped from actually doing that, subject to some exceptions—and they are
important exceptions, to do with justice issues. But, yes, that is the basic principle: that the Australian court
should say, 'No, we're not going to hear that matter; you've agreed that you're hearing that matter in Korea'—if
Korea were a contracting state—
CHAIR: Mr Walter, if this convention had been ratified a few years ago, how many judgements would this
have covered? What is the historical number we are looking at here?
Mr Walter: We do not have numbers, and the reason for that is: it is actually quite complicated because every
court in Australia could potentially have something that they would be considering an application for under the
common law or under the Foreign Judgments Act. So I cannot actually give you an exact figure. We expect that
that number will actually grow—well, acknowledging that there is no figure there! We expect that there will be an
increase in the number of judgements you will see coming in this area, partly from a transference of matters being
dealt with by arbitration.
Just to give you some context there, the New York convention, which relates to the recognition and
enforcement of arbitral agreements, has a very large membership—one of the largest of any convention in the
world—and has a quite seamless process for recognising and enforcing arbitral awards. There is no corresponding
agreement for judgements, and so we think that, with the growth of choice of court and the potential conclusion of
a broad based judgements agreement, we will see more and more of these things.
CHAIR: Can you give an example of what it looks like? Let us say there is a company—let us call it
Bloggs—and it is the global producer of radiators on racing cars.
Mr Walter: Yes?
CHAIR: Well, Bathurst was just on; I was trying to be relevant! It is hypothetical.
Mr Walter: Sure. In the typical instance, pretty much any commercial contract that goes across borders has a
choice of court agreement in it and often will have a choice of law agreement in it. But to sort of simplify it: let us
say that an Australian and Chinese business—
CHAIR: So Bloggs is selling radiators into the Chinese NASCAR. Just work with me.
Mr Walter: Okay. So Bloggs is selling radiators into Chinese NASCAR. They have a contract with the
Chinese company to provide those radiators. In that agreement, they will have some dispute resolution clauses.
They might nominate the method of dispute resolution. Typically, it is either going to court or it is going to
arbitration, but in this instance they have decided to nominate that they are going to court. The two companies
might, for a number of reasons, decide they want to nominate a court.
One is to avoid parallel proceedings—that is, a dispute arises, the Australian company takes action in Australia,
the Chinese company takes action in China; you have got two disputes going on simultaneously, potentially
resulting in conflicting judgements. You do not want that. That is not good for business. So they might nominate a
particular court to hear their matter. Their choice of that will take into account a number of factors. Often in
international agreements they will nominate a neutral venue. So those two countries might say: 'We won't have an
Australian court, we won't have a Chinese court, we will choose Singapore,' or, 'We will choose London.'
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The other thing that they are likely to have in that agreement is a choice-of-law agreement. That is saying that
the matter will be heard in Singapore using Singaporese commercial law. But sometimes you will have it in
Singapore using another law, and that often comes up, for example, in maritime contracts, where basically the law
of UK is the international law relating to maritime contracts. So you might nominate a court in Singapore to hear
using the law of London. But, if it is a maritime contract, again, you might nominate London because of their
particular expertise in resolving those disputes.
CHAIR: So Bloggs is now selling radiators into Singapore. We have both now ratified the choice of court
convention.
Mr Walter: Yes.
CHAIR: So let's work through the dispute again.
Mr Walter: A dispute arises between the two parties. Let us say Bloggs says: 'Righto, we've got our best
chance here of taking action in Australia. Let's ignore our choice-of-court agreement. We're going to get a better
outcome if we go to the Supreme Court of WA,' or Victoria or whatever. They go to take the action in that court.
Their partner from China says to the court: 'Hang on. We've got an exclusive choice-of-court agreement here.
This matter is being heard in Singapore.' In that instance the Australian court would have to say, 'No, we're not
going to hear that dispute,' or they would have to go through those exceptions and say, 'Actually, a manifest
injustice is going to occur here if the matter is heard in Singapore.'
CHAIR: With this particular dispute between Bloggs and a company in Singapore, how is it the choice of
court is actually Singapore, or was that in the agreement?
Mr Walter: It is in the contract.
CHAIR: So in the contract the two parties would say, 'If there is an issue the choice of court is X'?
Mr Walter: Yes.
CHAIR: Ipso facto, does that mean that, once this comes into play, any contract between any Australian
companies with any of companies from any of the signed nation-states in the agreement has to have a choice-ofcourt
provision?
Mr Walter: No, you do not have to have a choice-of-court agreement in your contract. They are pretty much
standard. If you have got a lawyer, they going to put a choice-of-court clause in. But if you do not have one then
you have that risk of those parallel proceedings I mentioned. You also have the risk that you will take an action in
an Australian court and the Australian court will go through its normal grounds of determining whether it has
jurisdiction and it will say, 'Actually, no, we can't hear your matter, because there is not enough nexus between
us, this court, and your dispute.' If the dispute were about a contract being executed in China—all the action was
taking place in China, for example—an Australian court might be a little reluctant to hear your matter. So at the
moment it would be a bit of a free-for-all—whichever court you could get to hear your matter. And you might
have both parties going simultaneously to try and head each other off in different courts in different countries.
Mr WALLACE: One thing that concerns me about this—and I cannot find the case—is that effectively what
this leads to is excluding the powers of the Supreme Court. I know that this is done, but have there been any
specific cases on point? The case I am trying to think of is a High Court decision which ruled that, where the
power of the Supreme Court is usurped, it is unconstitutional. If you said the name I would recognise it—perhaps
Ms Vasenszky might know it. It was a WorkCover claim. I remember the facts but I cannot remember the name
of the case. My concern is that we do not want to usurp the power of the supreme courts of Australia. Where the
parties are in agreement that the jurisdiction might be the laws of, say, Calithumpia, what happens in a situation
where an Australian party is a party to that agreement? We all know that, in some circumstances, some parties
have more leverage over others. An Australian company might find themselves having to litigate a case in the
Supreme Court of Calithumpia, whose system is perhaps not quite as robust as ours. Aren't we usurping the
Supreme Court of Queensland if a Queensland company was a defendant or a litigant?
Mr Walter: There are lots of cases on chapter III of the Constitution in relation to exactly that point of how
far you can go in restricting the discretion of a court to either deal with a matter or make a decision. The critical
point is not to go too far to get rid of that discretion. There was a case in the High Court, whose name escapes me,
that was dealing with the International Arbitration Act in that context and similar kinds of principles. It found that
it was fine and that it was well within the chapter III mandate.
There are a couple of things going on in your example. Assuming that the party tried to bring an action in
Queensland, the starting point would be that the Queensland Supreme Court would say, 'No, hang on, you've got a
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Monday, 10 October 2016 JOINT Page 9
choice of court agreement.' However, there are a range of circumstances set out in article 6 of the convention
where the court could say, 'No, we're going to hear it.' I will briefly run through them. The convention states:
a) the agreement is null and void under the law of the State of the chosen court.
That means it is not enforceable in Calithumpia, in your example. Article 6b) relates to when 'a party lacked the
capacity to conclude the agreement'. The main one here, though, is article 6(c):
giving effect to the agreement would lead to a manifest injustice or would be manifestly contrary to the public policy of the
State of the court seised;
There is a question there: in your circumstances, is there going to be such a gross injustice that an Australian court
would say, 'You know what—we're going to hear this; this agreement just isn't right'? Then, let's say that that did
not happen and it went off to Calithumpia. When the judgement comes back to be enforced or recognised in
Australia, there are a set of not quite corresponding circumstances in article 9 which again allow a court to look at
the agreement and decide whether it is going to be recognised and enforced. There are a couple of important
elements in here. One is that it was obtained by fraud in the proceedings. So, if something bad happened in
Calithumpia, in your example—they bribed the judge—we do not have to enforce that; we are not in that kind of
state. But probably the big one is 9e):
recognition or enforcement would be manifestly incompatible with the public policy of the requested State—
Australia in this instance—
including situations—
and these are the critical words, I think, for your example—
where the specific proceedings leading to the judgment were incompatible with fundamental principles of procedural fairness
of that State;
In that instance, where evidence is led that things were pretty bad in Calithumpia, the court has a discretion to say,
'No, we're not recognising this judgement.'
Mr WALLACE: Thank you very much.
CHAIR: There seems to be a little bit of self-evidence about all of this. Let's say I am from Australia and you
are from Singapore, we are both companies that have entered an agreement and we have agreed that we are going
to use the court of Singapore—we have agreed this. The convention imposes three obligations. The first is that the
court designated in the agreement is obliged to exercise jurisdiction—why wouldn't they? The second is that all
other courts are obliged to decline it. We have already agreed in the document that we will use the court of
Singapore, so why would Australia hear it? The third is that judgements given by the chosen courts must be
recognised and enforced. Are there degrees of the bleeding obviously here?
Mr Walter: Yes and no—definitely yes for 80 per cent of that. It kind of makes sense. We live in a supply
chain world and there are contracts going everywhere; it makes sense that we would have agreements to deal with
this complexity and that they should be enforced. However, if you take that example, where we have agreed that
the court in Singapore is going to hear the matter, that is relatively straightforward. It is when we decide
somewhere else. We are an Australia-Singapore party and we are dealing with transactions essentially between
Australia and Singapore in geographical terms, but we decide that we want that third neutral venue. We think it is
better if neither of us has a hometown advantage—and there is a hometown advantage in that you know the law
better, your lawyers will know the law better, you know the legal system and all those kinds of things. So we
decide on London.
The court in London has nothing to do with the contract. The parties are from Australia and Singapore. The law
being applied, maybe, is the law of Singapore. The contract was performed in Singapore. The breach of the
contract occurred in Australia. The court in London has no reason to pick that matter up and say, 'We'll run with
it,' apart from the fact that the parties have agreed that that should be the venue for hearing the dispute.
CHAIR: And therefore it has to because it is—
Mr Walter: And therefore it has to.
CHAIR: Just out of interest, where are the costs in that space? Suddenly the court in London now has
substantial costs that Her Majesty's law of government is particularly unhappy about, because they have a finite
number of courts, as we do.
Mr Walter: Of course, but in those kinds of circumstances, they will probably be finding a way to impose
fees on those parties because they have been nominated as the court to hear those matters.
CHAIR: Is there anything within the agreement that deals with this issue of cost recovery or fees?
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Page 10 House of Representatives Monday, 10 October 2016
Mr Walter: No.
CHAIR: We just assumed that they are all big players and they will sort it out?
Mr Walter: They will all sort themselves out. Just for the committee's awareness, the courts in Australia are
strongly in favour of this agreement. We have had multiple consultations with them and a number of very senior
judges in the country have written to the Attorney-General asking him to get on with acceding to it. So there is
strong support for it, because it goes both ways. Courts are actually in the business, to a certain extent, of
attracting these players because they can charge fees for them—big commercial arrangements. They want to be in
that game.
CHAIR: Actually, Mr Walter, I thought the courts were in the process of dispensing and hearing justice on
behalf of Australian citizens, not being a money-making venue to attract things from overseas.
Mr Walter: Of course, but—
CHAIR: I think the parliament would be rather concerned if, indeed, courts were using this as an opportunity
to generate income.
Mr Walter: I may have gone too far in that statement. But the courts are exactly that: they are interested in
resolving disputes and seeing disputes resolved, primarily, for the Australian public. But the benefits here are also
that those judgements being made in Australia, often relating to Australian parties, are then enforceable overseas.
That is the big benefit of this for Australia's courts, that they can make a judgement and it can be taken overseas
to where assets of big companies lie and they can have it enforced.
CHAIR: Senator Macdonald raised this in terms of the free trade agreements we have negotiated with China,
South Korea and Japan, and we now have free trade agreements in terms of the ASEAN space—of course, with
Thailand, and the TPP is widening that to include jurisdictions such as Malaysia. Is there any mood within the
wider ASEAN and then the ASEAN Plus nations to join the convention of courts, noting Singapore is already
included?
Mr Walter: One of the interesting things about the Hague conference—and I think we are up to 81 member
states and the EU as a regional organisation—is that Asia is chronically underrepresented. However, that has
begun to shift in the last few years. Singapore is a relatively new player in the space. Vietnam is a relatively new
player in the space. China has been there for a long time and has just become a very active player in a way that it
had not previously. The Hague conference has recently opened a regional office in Hong Kong, partly funded by
the generous contribution of the Chinese government. There is a big push in Asia to encourage countries to join
the Hague conference or joint particular conventions. The choice of court convention is very much one of those
that is seen as a core convention of the Hague conference to which countries in Asia should look to sign up. And
Australia, of course, is encouraging that.
CHAIR: Are you aware of any other nations that are currently 'negotiating'—maybe the incorrect word—or
looking to also join up to this choice of courts?
Mr Walter: Yes. I understand that Japan and China—there is a whole range of countries; the US is
considering it. The US have particular complexities in this space which will make it a bit tricky for them.
Certainly, informally, there is a range of countries that are looking at. It has gained definite momentum now that it
is in force.
CHAIR: It entered into force in October 2015. Was that because the European Union approved it?
Mr Walter: Yes. That got over the required number to bring that convention into force.
CHAIR: And where the United States up to?
Mr Walter: I cannot give you a definite answer on that. My sense is that they are thinking about it. I
mentioned earlier that there is this broad-based negotiation going on as well. I suspect they might wait to see
where that lands. It is particularly complex because of constitutional issues in the United States.
CHAIR: It is four congresses ago that they signed it.
Mr Walter: Yes.
Senator McALLISTER: Thanks for your testimony this morning. I was interested to understand some of the
problems that this international agreement is trying to head off. I assume that essentially the problem we are
trying to deal with is people breaching their choice of court agreements and then going jurisdiction shopping for
something that will suit them best. Is that correct?
Mr Walter: Yes. The choice of court agreements is there to overcome uncertainty. Parties are trying to make
sure that their contractual arrangements are as sound as possible but also when a dispute arises it is finalised as
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Monday, 10 October 2016 JOINT Page 11
soon as possible. An important aspect here in commercial contracts is that does not necessarily mean the end of
the relationship; often it is some small component of a very large complex deal that has gone awry for whatever
reason. They want to quarantine that from the rest of the relationship, deal with it as efficiently as possible and get
on with their broader relationship. So it is not like a divorce or something like that where you are seeing
permanent severing of relationships. That is a core issue for them—they want to be able to resolve disputes
quickly and efficiently so they can get on with the rest of the arrangement. Of course sometimes you are dealing
with the more extreme cases.
Those contractual agreements are trying to overcome that uncertainty by narrowing down to one court where
this will be resolved, what law will apply, and then we can get on and solve that problem. At the moment if you
do not have one of those agreements it can be a free for all, so you are just going to take your matter to your local
court—the one that you know best. That can create uncertainty, as I said; particularly if both parties commence
proceedings you then have an issue of which one trumps the other one, what if you get inconsistent judgements,
what applies—all those kinds of problems arise. This is trying to allow parties to make that decision and that
decision to be honoured wherever the parties end up in dispute.
Senator McALLISTER: So there are two limbs to enhancing certainty—the first is in which jurisdiction will
the matter be heard and the second is an agreement between signatory nations to observe and enforce the
jurisdiction that is chosen?
Mr Walter: That is correct.
CHAIR: Thank you for your attendance here today. If you have been asked to provide any additional
information, could you please forward it to the secretary within seven working days. You will be sent a copy of
the transcript of your evidence and you will have an opportunity to request corrections to transcription errors.
Thank you for your time.
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Page 12 House of Representatives Monday, 10 October 2016
BRINK, Ms Tegan, Assistant Secretary, Goods and Investment Branch, Department of Foreign Affairs and
Trade
EMERSON-ELLIOTT, Mr Richard, Director, Agriculture Policy and Negotiations Section, Department of
Foreign Affairs and Trade
McCLINTOCK, Ms Jane, Acting Assistant Secretary, Trade and Customs Branch, Department of
Immigration and Border Protection
NEWNHAM, Mr Simon, Assistant Secretary, Agriculture and Food Branch, Office of Trade Negotiations,
Department of Foreign Affairs and Trade
ROSS, Mr Paul, Assistant Secretary, Bilateral Engagement and Trade Policy Branch, Trade and Market
Access Division, Department of Agriculture and Water Resources
TWISK, Mr Simon, Director, Industrials and Market Access Section, Office of Trade Negotiations,
Department of Foreign Affairs and Trade
WILSON, Mr Scott, Manager, Trade Policy Division, Department of Industry, Innovation and Science
[12:24]
GATT Schedule of Concessions—amendment
CHAIR: The committee will now take evidence on amendments to Australia's schedule of concessions in the
General Agreement on Tariffs 1994. I now welcome representatives from the Department of Foreign Affairs and
Trade, the Department of Immigration and Border Security, the Department of Agriculture and Water Resources
and the Department of Industry, Innovation and Science to give evidence today.
While the committee does not require you to give evidence under oath, I should advise you that this hearing is
a legal proceeding of the parliament and therefore has the same standing as proceedings in the respective houses.
The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament.
The evidence given today will be recorded by Hansard and attracts parliamentary privilege. I now invite you to
make a brief opening statement before we proceed to discussion.
Ms Brink: Thank you, Chair. Good afternoon, everybody. Thank you very much for the opportunity to appear
before the committee today to provide an opening statement on the treaty action of this inquiry—which, as you
said, is an amendment to Australia's WTO schedule of concessions for trade in goods to implement outcomes of
the 10th WTO Ministerial Conference, also known as MC10, which was held in Nairobi, Kenya, in December last
year.
Over the last three decades, successive Australian governments have pursued trade policy that promotes
openness, competitiveness and flexibility. A more open and transparent trading system supports productivity and
the efficient utilisation of resources both within the Australian economy and globally. In short, an open trade
economy stimulates economic growth and employment. Internationally, Australia pursues trade opening in
multilateral, bilateral and regional fora. Of these, we know that multilateral trade reforms pay the greatest
dividends. They ensure that trade is non-discriminatory and they encourage the most competition and innovation.
Yet multilateral trade reforms have proven elusive in recent times, given the challenges of reaching global
consensus. That is why the decision at the Nairobi conference last year is so significant. All WTO members came
together and agreed on a package of trade reforms, including the historic decision to eliminate export subsidy
entitlements. Ministers also agreed to expand the Information Technology Agreement. Both of these outcomes
require treaty action by Australia. I will briefly address each in turn, starting with agriculture.
The deal to abolish all agricultural export subsidies is the most significant outcome on agriculture in the WTO
ever. For decades, agricultural export subsidies have disadvantaged Australian farmers. They have been used by
foreign governments to artificially enhance the competitiveness of their exports. They are among the most tradedistorting
forms of support and have been banned in industrial trade since the 1950s. The Nairobi decision will
permanently remove more than $15 billion worth of scheduled export subsidy entitlements—immediately for
most developed countries and by the end of 2018 for developing countries in most cases.
Senator IAN MACDONALD: Does that include the United States?
Ms Brink: It does. The majority of these entitlements are for countries in North America, including the United
States, as well as in Europe. They are obviously Australia's traditional competitors in the agriculture field, and
their farmers also enjoy, as you would know, substantial domestic subsidies. They are unnecessary and they are
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Monday, 10 October 2016 JOINT Page 13
damaging to world trade. To give you an example: when the European Union last used export subsidies for skim
milk powder in 2009, world prices dropped by as much as 40 per cent. For farmers who were operating on razorthin
margins, distortions like this can really put them out of business.
Australian farmers stand to benefit from the removal of export subsidy entitlements in some of our most
important agricultural exports: sugar, dairy, cotton and wheat in particular. It is a major win that complements the
market access gains that Australia has delivered through the free trade agreements that we have negotiated. As an
addendum, this outcome in Nairobi last December took some time to negotiate. This year is the 30th anniversary
of the founding of the Cairns Group of agricultural trading nations, through which Australian governments, on
both sides of the House, have worked with like-minded governments around the world to push global negotiations
in agricultural trade reform. That is to say, I guess, that decades of hard work culminated in this decision last year.
Moving now to the expanded ITA, at this conference last year over 50 WTO members concluded the
ministerial declaration on the expanded information technology agreement, thereby agreeing to eliminate tariffs
on 201 information and communications technology products—including a range of medical devices, advanced
manufacturing products and telecommunication satellites, as well as a range of everyday consumer products such
as headphones and speakers.
The original ITA was concluded in 1996, but since then we have seen a huge growth in trade in technology
products. And products, for example, that are very common today, such as GPS devices and touch screens, were
not included in the original ITA. The WTO estimates that the expanded ITA will now cover about $1.3 trillion in
global trade, worth almost 10 per cent of all global trade.
For its part, Australia is estimated to export about $3.6 billion of products covered by this agreement. While
many already receive tariff-free treatment, the agreement will ensure that these tariffs are permanently bound at
zero, will provide some new market access opportunities and will also reduce red tape for businesses which
currently claim preferential rates or tariff concessions. The Australian government consulted widely with
Australian industry stakeholders about the ITA, and there was strong support for Australia's participation. I think
there was recognition of the benefits of the expanded ITA in lowering costs and in improving competitiveness.
Overall, to conclude, I think the implementation of these two decisions very much reflects Australia's national
interest, and I commend the treaty actions and the national interest analysis to you for your consideration. Thank
you.
Senator IAN MACDONALD: Do I understand you to be telling us that there are no more subsidies in the
United States for United States farm products—and in Europe with their sugar beet?
Ms Brink: Export subsidy entitlements.
Mr Newnham: It is important to differentiate export subsidies from domestic support—export subsidies being
a standalone silo of WTO work, and that is what this agreement covers. Domestic support, domestic subsidies, are
still in place. There has been no tangible process in WTO negotiations on that front—we continue to fight them. I
think that is where your question might be directed—those massive domestic subsidy programs are still in place.
Senator IAN MACDONALD: But the Cairns Group that you spoke about—that was all about trying to get
rid of domestic subsidies, wasn't it?
Mr Newnham: It has been fighting on a bunch of fronts, but export subsidies has certainly been a key feature
of what they are fighting against, as well as the domestic support. When you think about it, you have the export
subsidies, you have domestic support and you have market access, so tariffs—all three are where the Cairns
Group has focused its attention in the agriculture negotiations. This is just the first silo of negotiations.
Senator IAN MACDONALD: Can you tell us what countries, principally those we deal with, were involved
with export subsidies and to what extent they were—not down to the last dollar and cent, but in general terms?
Mr Newnham: Since 2005 there have been $6 billion worth of export subsidies used—
Senator IAN MACDONALD: Between whom and for what?
Mr Newnham: Primarily the EU and the US are applying those. There are two layers to my answer—one is
the actual subsidies used and one is the entitlements. The entitlements are in the order of $15 billion, almost $14
billion of which is for developed countries. The EU and the US make up the bulk of those. That is their
entitlements. What they actually use underneath that varies, depending on the time and the issues. Ms Brink
mentioned earlier the 40 per cent tariff that was put on in 2009 on skim milk powder which raised the price back
then. Those entitlements are no longer being used, but that cap has existed the whole way through with countries
using it depending on the particular time period. That is a partial answer to your question.
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Page 14 House of Representatives Monday, 10 October 2016
Senator IAN MACDONALD: So they are subsidies of the country that is exporting, and it is some sort of
subsidy paid to the producer-manufacturer to enable them to sell their products overseas at a cheap price. Would
that not be covered by antidumping?
Mr Newnham: Antidumping has quite distinct and specific requirements for showing that, in fact, that
product has been dumped from one country to another.
Senator IAN MACDONALD: Isn't one of the tenets of antidumping where exports by a particular country
are subsidised to a price that is obviously below the cost of production? Isn't that what dumping is all about?
Mr Newnham: There is antidumping and then there is countervailing duties. Countervailing duties are
actually the area which you can put on with subsidised product. That is right, but there are a couple of parameters
around that. One is that they are contingent on exports, so you have to show that that country has applied those
subsidies contingent on exports. The second point to make is that it is beyond the WTO entitlements. There are
actually WTO rules that allow for export subsidies, until the Nairobi decision last year. The third thing is you
have to show is that injury was caused by that, and the last thing I would say is, in relation to CVD cases,
countervailing duties cases, it is country to country. So Australia, for example, would claim that an individual
country has subsidised its product and sent it to us, and then it is a country to country dispute. Multiple countries
can be involved but it tends to be one-to-one. This is, in fact, headline WTO entitlements which have now been
reduced to zero across the board for all 163 members.
Senator IAN MACDONALD: Do you have figures? Does your statement, which I have not read in detail,
say what that means to Australia in cash terms?
Mr Newnham: There is $15.746 billion that is currently part of WTO entitlements, so countries are able to
spend that money on export subsidies as it stands. To break that down, for example, a bit over $12 billion is
European Union entitlements. Maybe I will throw to Mr Ross from the Department of Agriculture to give you a
little bit more detail on that.
Mr Ross: On the expenditure from Europe on subsidies?
CHAIR: The EU spends 12 billion bucks on export subsidies. What do they do with the money? What does it
look like? How do they spend it?
Mr Ross: They utilise it to alter the price that the producers in the EU receive for their product, so it provides
an incentive for them to overproduce and, hence, influence the world price.
Senator IAN MACDONALD: If the cost of production is 100, the European government gives the producer
20 so that the producer can sell it for 80 and thus beating the competition that might have been selling it for 90.
Mr Ross: Yes, that is essentially the concept.
CHAIR: I am not a cynic, however, what stops countries, or conglomerates like the EU, simply getting rid of
export subsidies but beefing up domestic subsidies or using other non-tariff barriers—that is, getting rid of taking
the $12 billion the EU use and putting the money into domestic support, domestic subsidy or domestic
environmental-based non-tariff barriers to achieve the same effect at the same dollar cost?
Mr Newnham: I might try for two parts to my answer. The first is, just to be clear, these are entitlements, so I
am not trying to suggest to the committee that on any given day there are $15 billion worth of export subsidies
being applied, but that is what is allowed by the system. So, to your question, it is not like the EU has $12 billion
that is currently applied there and now it is going to move it to somewhere else.
CHAIR: Let us say they apply $10 billion to the $12 billion?
Mr Newnham: Sure. The short answer is that can be done but, of course, there are existing WTO rules about
domestic support and, in particular, are these the sorts of subsidies that distort trade, that affect production, that
affect prices, and if they are they go into certain categories. There is a very dense, complex set of boxes—you will
have heard of amber box and green box and blue box and so forth. They are existing rules around this but, to be
fairly blunt about it, this is exactly the sort of thing that we are still trying to fight on in the WTO context, to
actually take forward that domestic support fight. So, I am not pretending this solves that. You are, indeed,
correct. This is a future set of negotiations that we keep fighting on.
CHAIR: This is clearly a good step, but it may not be as large a step as we would all hope it to be?
Mr Newnham: Indeed. You can look at it in a couple of different ways. That is exactly right. There are still
these two huge pillars left in the WTO context: the domestic support and the market access—that is, tariffs. They
are huge, and they are really—many would say—the big game when it comes to trade liberalisation on
agriculture. On the other hand, this is the most significant agriculture outcome in the WTO ever, and 163
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Monday, 10 October 2016 JOINT Page 15
members agreed to it. Frankly, some people were a little surprised this was actually achieved. I think it is worth
reflecting that it was a significant step, even if there are still big steps to come.
Senator IAN MACDONALD: Going back to my question, what does it mean to Australia in cash terms? I
am particularly interested in agricultural products. The second part to the question is: why have we not heard
about this before? Perhaps we have, and I have missed it. Is it a big deal for Australia, in cash terms? Mr Ross,
that is probably a question for you.
Mr Ross: Yes, and it is a difficult one to answer in those terms. As was mentioned earlier, the export subsidy
had not been used for a little while, but when they are used they impact on the returns to our farmers. I guess the
cost at the moment is the uncertainty around the fact that, up until now, they could be utilised again. Now we have
certainty that they are to be eliminated—it is hard to quantify that in cash terms, but it is certainly a reassurance to
our exporters.
Ms Brink: I will just add one point on the significance of export subsidies versus domestic support, which
goes your question, Mr Chairman. I think we need to bear in mind that export subsidies are defined and they are
contingent on export. It is a model of subsidisation that allows, for example, the EU to subsidise farmers to put
their products more cheaply on the world market, while, to a certain extent, insulating their own market. That is
why export subsidies are—while only one of the three pillars that Mr Newnham mentioned—the most tradedistorting
form of subsidy that exists. I think therein lies some of its significance as well.
Mr Newnham : To come back to the senator's question about the significance, the Cairns Group statement is
obviously very important, and the support from agricultural industries in Australia has been very strong on this.
But even if we cannot put in exact monetary terms what it means for the farming community, it is the potential
that has been wiped out here. When food prices spiked some six or seven years ago a number of countries
resorted to export subsidies, which many economists would argue exacerbated the food security issues that were
in existence at that time. The suggestion here is that that is no longer going to be a viable option—that option is
eradicated. That is a more general answer to your question.
Senator IAN MACDONALD: An example you can give me is skim milk—foreign producers subsidised
exports, which meant Australian producers could not compete.
Mr Newnham : Yes.
Senator IAN MACDONALD: Is that probably the last significant example that affected Australia?
Mr Newnham : That is my understanding, yes.
Senator IAN MACDONALD: So the answer is yes?
Mr Newnham : Yes.
Senator IAN MACDONALD: Do we have any facts and figures on that to quantify it—but how could you?
Did we lose markets because of the skim milk thing? Is that recorded? Can anyone tell us?
Mr Newnham : Unless Mr Ross has an answer—
Mr Ross: No, I would have to take than on notice.
Senator IAN MACDONALD: Is that a reasonable question to take on notice?
Mr Newnham : Yes, we will take that on notice.
Ms Brink: I think the point I made in my opening statement was that the world price went down by 40 per
cent. If your question is about the impact, that is the impact.
Senator IAN MACDONALD: Okay. Do we know what skim milk exports Australia was looking forward to
selling but did not sell because the price had fallen—I assume, with a 40 per cent drop—below the cost of
production in Australia?
Ms Brink: That is right. We do not have that statistic to hand, but, given our cost of production stayed the
same, I think one can assume it had quite a deleterious impact.
Senator IAN MACDONALD: Is it possible, on notice, to get a quantification of that?
Mr Ross: We can try, yes.
Senator IAN MACDONALD: Thank you.
Ms TEMPLEMAN: I was actually at the Cairns Group meeting 30 years ago.
CHAIR: Were you really?
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Page 16 House of Representatives Monday, 10 October 2016
Ms TEMPLEMAN: I was—as a young journalist. It is interesting to see the longevity of the Cairns Group,
but I want to ask about the expanded ITA. Have any stakeholders raised concerns about that with you, and, if so,
who and what?
Ms Brink: No, we have received no concerns in our stakeholder consultations about Australia's participation
in this negotiation.
Ms TEMPLEMAN: And you have sought input from the sector?
Ms Brink: Indeed. That is correct. So we sought stakeholder input from a number of bodies, including the
Australian Industry Group, which obviously represents a number of manufacturers; the Australian Information
Industry Association; the Interactive Games and Entertainment Association, who had a particular interest in video
game consoles; the Consumer Electronics Society; Telstra; Cochlear, who was also interested, because of their
exports, of course, of medical devices; and also IBM and Hewlett-Packard. We put information on the DFAT
website as well about the negotiations and invited submissions, and concerns were not raised from any group
about this agreement.
Ms TEMPLEMAN: And, in terms of the flow-on price reductions for consumers, what reasonable estimates
or forward thinking is there around that?
Ms Brink: So the agreement includes a commitment to cut tariffs on 201 technology products to zero. In the
Australian situation, we already apply a zero tariff to 146 of those products. So that is about 55 products that are
left. They currently have an applied tariff of five per cent. So it is a pretty small tariff that remains but I guess one
point I would make is that, because this is a global agreement, if you like, there are dynamic gains across markets,
given value-chains. So the actual cost implications in cost-benefits for end consumers may be greater than
perhaps just the five per cent. IT products of course are a significant input to pretty much all sectors of the
economy. So the beneficiaries are everybody from a big exporter of technology products to a SME Australia who
needs these devices for their small business.
Ms TEMPLEMAN: Thank you, yes. These were definitely not things we knew about 30 years ago.
Ms Brink: That is right.
Ms TEMPLEMAN: Thank you.
CHAIR: Can I just go back to the three nasty pillars in terms of world trade. You talk about the domestic
production support, the market access/tariffs and, of course, the export subsidies. Where do you put in this
growing nasty fourth one of non-tariff barriers—countries using their environmental laws or heritage laws or
heaven-knows what else—
Senator Ian Macdonald interjecting—
CHAIR: I am talking about why are countries using non-tariff barriers to protect their local industries? Is it
growing? Is it becoming a problem? Is it not an issue?
Ms Brink: You raise a very good point, and it is something that business raises with us regularly when we
consult various stakeholders on trade negotiations and trade agreements. With the global reduction in tariffs, with
tariffs becoming a less important part of the picture, non-tariff barriers are obviously becoming more significant
in terms of their effect on trade.
There are rules around non-tariff barriers. For example—the WTO—we have the agreement on technical
barriers to trade. We also have the agreement on sanitary and phyto-sanitary measures. So these establish certain
principles that all WTO members have to comply with that should provide a check on some of the more egregious
forms of non-tariff barriers that perhaps you are referring to. And, just to give you a sense of some of these
principles, it means that non-tariff barriers have to be non-discriminatory, they have to be necessary to achieve
their objective, not more trade distorting than necessary to achieve that objective. There are a number of disputes
in the WTO relating to these kinds of measures—for example, involving the labelling of food products or
involving country of origin. I am not sure if my colleague Simon would like to add anything on SPS in particular.
Mr Newnham: Not really. Just to say, Mr Chairman, that your question does reflect what industry is saying—
that is, as we make progress through free trade agreements or WTO et cetera, exactly the point Ms Brink has
raised. These then become more obvious and in the spotlight, and certainly that is something where industry and
departments have a great deal of consultation ongoing.
Ms Brink: And it is the reason why in some of our FTAs we have sought to go beyond the WTO in terms of
mechanisms to address non-tariff barriers. So, as a general principle, Australia's FTAs retain WTO rules on SPS
and TBT measures, but they may include additional transparency requirements and they may include additional
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Monday, 10 October 2016 JOINT Page 17
mechanisms so that Australia can raise with our FTA partner a particular non-tariff measure that has been raised
by Australian industry.
CHAIR: In terms of the reduction of tariffs on 55 tech products coming in to make the 201, should
Australians be seeing any price reductions any time soon?
Ms Brink: As I mentioned, the 146 already enter tariff free. A further 79 will be phased out over a three-year
period and six goods will be phased out over a five-year period. Of course, whether that five per cent is reflected
in the final price also includes commercial decisions.
CHAIR: I will take that as a no, Ms Brink.
Ms Brink: Not necessarily.
Mr Twisk: Where there is a five per cent tariff, that is the general tariff rate or the MFN tariff rate. Of course,
goods which are coming in from our FTA partners will usually be coming in duty free already. On top of that, we
have a system of tariff concession orders where if goods are not made in Australia the importer can apply for a
tariff concession order to bring those goods in duty free. So even with those 79 items where there is a general
tariff of five per cent, a lot of the goods are still coming in duty free already.
CHAIR: Fair enough. Thank you for your attendance here today. If you have been asked to provide any
additional information, which you have on milk powder, would you please forward it to the secretary within
seven working days. You will receive a copy of the transcript of your evidence and you will have an opportunity
to request corrections to any transcription errors. Thank you, we appreciated that. I formally declare the public
hearing closed.
Committee adjourned at 12:51
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