House of Representatives

Second Reading Speech

Mr Brendan O'Connor (Minister for Home Affairs)

I move:

That this bill be now read a second time.

I am pleased to introduce the implementing legislation for the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (the Free Trade Agreement).

The free trade agreement was signed on 27 February 2009 by the Minister for Trade, the Hon. Simon Crean MP, and representatives of the 11 other parties to the agreement, namely New Zealand and the ASEAN member states of Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The customs legislation now being introduced is the administrative process that enables this agreement to become a binding treaty.

I refer members to the ministerial statement made by the Minister for Trade on 17 March 2009 tabling the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area and the accompanying national interest analysis.

The free trade agreement is a comprehensive agreement that will provide Australian exporters and investors with improved export market access, certainty and transparency in ASEAN markets.

This is the largest free trade agreement Australia has concluded. ASEAN member states and New Zealand together account for 20 per cent of Australia's total trade in goods and services, which were worth $112 billion in 2008.

The agreement will reduce or eliminate tariffs across a region that is home to 600 million people and a region with a combined GDP of A$3.2 trillion.

This means greater job opportunities here in Australia.

The agreement is also the most comprehensive free trade agreement that ASEAN has concluded. It is more comprehensive and deeper than ASEAN's other free trade agreements with China, Japan and Korea. Importantly, the agreement is also the first free trade agreement Australia has signed since the onset of the global financial crisis, so it sends a very strong signal that protectionism will not help countries get out of a recession.

The free trade agreement provides for the progressive reduction or, for most products, the elimination of tariffs imposed on Australian goods exported to ASEAN member states.

Specifically, the agreement will deliver, over time, elimination of duties on between 90 and 100 per cent of the tariff lines of the more developed ASEAN countries and Vietnam, covering 96 per cent of current Australian exports to the region.

Australia will eliminate, over time, all tariffs on imports from the parties to the agreement.

The free trade agreement is expected to enter into force on 1 January 2010.

The Joint Standing Committee on Treaties has considered the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area. The JSCOT Report was tabled on 24 June and recommended that binding treaty action be taken. The committee's recommendation paved the way for this important legislation to be passed.

In Bangkok last month, trade ministers from ASEAN, Australia and New Zealand renewed political will to redouble efforts to ensure this free trade agreement will come into force by 1 January 2010.

It is a milestone for Australia-both for our trade policy and for Australian exporters.

Implementing Legislation

In order to implement the agreement, two acts require amendment-the Customs Act 1901 and the Customs Tariff Act 1995.

The Customs Amendment (ASEAN-Australia-New Zealand Free Trade Agreement Implementation) Bill 2009 contains proposed amendments to the Customs Act 1901. These amendments give effect to Australia's obligations under chapter 3 of the free trade agreement dealing with rules of origin.

A complementary bill, the Customs Tariff Amendment (ASEAN-Australia-New Zealand Free Trade Agreement Implementation) Bill 2009, will amend the Customs Tariff Act 1995 to set out Australia's schedule of tariff commitments.

The Customs Amendment (ASEAN-Australia-New Zealand Free Trade Agreement Implementation) Bill 2009 provides the rules for determining whether goods originate in an ASEAN member state or in New Zealand.

Goods imported by Australia from an ASEAN member state or New Zealand that meet these 'rules of origin' will be able to claim preferential rates of duty under the agreement.

A rule of origin is specified in the free trade agreement for each tariff subheading and may require that the goods:

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be wholly obtained or wholly produced in an ASEAN member state or in New Zealand;

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meet a 'general rule'; or

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meet a product specific rule.

The 'general rule' dictates that a good must satisfy the requirement of a change in tariff heading or have a regional value content of 40 per cent. The general rule applies to all products that are not subject to product specific rules.

The product specific rules of origin apply to the goods listed in annex 2 of the free trade agreement.

In a large number of cases, the product specific rules in annex 2 require that there be a change in tariff chapter or change in tariff subheading to determine the originating status of goods. In some instances, the goods in annex 2 are required to meet a regional value content requirement only or a regional value content requirement combined with a change in tariff classification.

The approach of requiring goods to undergo a change in tariff classification to determine the originating status of goods has been used in other free trade agreements Australia has recently entered into, including with the United States, Thailand, Chile and the amended Australia-New Zealand Closer Economic Relations Trade Agreement.

The bill I introduce today will give effect to a new regional free trade agreement with ASEAN and New Zealand that will complement Australia's existing bilateral free trade agreements with the ASEAN member states of Singapore and Thailand and with New Zealand.

The free trade agreement will also deliver a significant gain for Australia in relation to ASEAN countries with which Australia does not have bilateral free trade agreements-in particular, the important markets of Indonesia, Malaysia, the Philippines and Vietnam.

The free trade agreement will further Australia's economic integration with the Asia-Pacific, a region with which our nation's economic future and security are closely tied. It will also provide a strong platform and legal framework for Australia's economic engagement with the region for many years to come.

Debate (on motion by Mr Billson ) adjourned.

Leave granted for second reading debate to resume at a later hour this day.